error when trying to update using a user account on a windows server 2003 machine
That's the problem right there. Regular user accounts can only update within their own "user profile" folder (Desktop, AppData, etc.). Only Admin users can update unimpeded in the other folders of your machine.
The normal behavior of wyUpdate is to ask for permission to run as an admin user if you try to install to a folder that requires admin permissions. So, why and how are you bypassing this normal behavior?