The designer never needs admin rights, and the InstantUpdate client doesn't need them to check updates. However, if an update for your product is found and the InstantUpdate client detects that it will need to update protected files or protected registry, the client will automatically prompt the user for a admin password (after the user clicks "Update", of course).
If the InstantUpdate client is already running as administrator (or elevated, in Vista), then it won't bother the user at all.
-Wyatt