Andrew,
You have to set the default installation folder (in your web update) to the installation location of your already installed program. See attached "code snipped" screenshot.
Well, you should not do this. Your application should request "asInvoker" privileges. Only system tools might need administrator execution level privileges. The correct way to handle this is to embed a manifest into your own .exe (this makes your application UAC- and Win7-aware). See "#embed UAC manifest..." compiler directive. If you set it to "requireAdministrator" then it will run elevated.
Another option is to use the "Set App Compatibility Mode..." script function and set the Privilege Level for your .exe. But again, you should not do this (it's very very bad practice).
Does this help?
Friedrich