Hey Riaan,
1.) If I did not sign my update (I unchecked the box) is this a problem for future updates?
It's a security risk if you don't sign your updates. We recommend signing your updates. There's very little down side.
2.) [...] How do I go about building my new msi to make all of this work?
Always include the latest client.wyc and wyUpdate.exe with your latest installer. See the Step-by-step walkthrough and the New release workflow.
3.) Can I delete files from my subsequent updates. I noticed a file that I did not require and want to remove it when I am doing say update v1.1 from v1.0
Yes, if you have a file in 1.0 and you no longer have it in 1.1, wyBuild is smart enough to know that you want the file deleted.
4.) My application's settings files (settings that my customer saves while using my app - an example - his address details typed in by him while using my application) get over written between updates - in particular my dot net application has a .settings file that contains my application settings. How do I make sure these settings does not get overwritten - or at least is there a way to put the settings back between updates? Basically when the update was done the customer did not lose his setting?
Don't include the settings file in your updates at all. That is, don't add them to any version within wyBuild.
Tell me if this helps.