We have just come across that same issue after 19 successful updates with the same settings.
When the update runs it fails on "The updated version of wyupdate required to update [our prouduct name] failed to install. We are running a custom version of wyupdate (just different icon and executable name only) from source, the build version is 2.6.18.0 and has been all along.
When the update failed its overwritten by the first executable in the update (with a different file size though)
Under Properties -> wyUpdate Tab i have added a site http://[our domain]/update/connect/custom-wyserver.wys and under the Update & Server files Tab I have Server file name set as custom-wyserver.wys
In the project tab -> Download Sites i have http://[our domain]/update/connect/%file% set as both server and update site.
I haven't uploaded our custom version to the url as its included in our installer and updates and has been all along.
Why is this happening now?