First, is updating to the network share supported? I'm guessing there shouldn't be any issues
Yes, this should work fine.
Is there any way for me to handle such scenario gracefully and notify the user of the problem and tell him to close the app on all other computers on the network?
The user that's updating the files will see a dialog that pops up if a file is in use. They'll see exactly which file is in use and will have the option of rolling back the update. But there's no easy way to know which computer on the network is using the file. For instance, your network could be several hundred thousand computers large -- there's no feasible way to search all the processes on all the computers in the network to tell exactly which computer is using the program.
Even if there was a quick way to search all the processes on all the computers in the network, and then send them a notification, there's no guaranteeing the user with permission to update the files has permission to iterate over the processes of other users.
So, the short answer is: no, you can't inform a user to close the app. However the user doing the updating will be shown which file is in use. The user doing the updating can then track down whoever's using the app, tell them to shut it down, and then wyUpdate will continue with the updating automatically.
Does this help?