If you add the same files/folders into multiple versions in wyBuild, then wyBuild will warn you but it will build successfully. However, it's always best to let wyBuild compare the versions of your software.
For cases where the apps are large we recommend buying an external harddrive. You can get 2TB harddrives for under a hundred dollars.
1. Can I add the 'references' to the files for the DB and Folder from just the ini setup folder without building the separate folders for each new version?
Yes, but there's room for error. I don't recommend it.
2. In either scenario do I need to upload all 3 then all 4 then all 5 etc files, or can I just upload the latest .wyu and .wys files?
wyBuild doesn't do incremental patches (yet). That is, wyBuild makes direct patches (A -> C, B -> C) not incremental patches (A -> B, B -> C). This means you'll have to upload all the "x.to.LATEST.wyu" files and the "wyserver.wys" file.
You can choose to exclude the "catch all" update (the larger file -- all.to.LATEST.wyu) by going in wyBuild and clicking File->Properties->Update & server files and unchecking "Create a catch-all update".
Tell me if this helps.