You don't have to uninstall before installing the new version, it handles that automatically.
In fact you can just run the installer with the /skipConfig command-line parameter to have it do exactly the same thing that the auto-update does. That is, it doesn't ask you any questions, you don't have to accept the license agreement (because you already have in the update scenario!), it just installs it.
As for the HTTP 500 error: I don't know. I haven't seen it myself. Your two reports are the only ones that I know of. The server that the updates are coming from is a large mirror network managed by BetaNews.
In any case I've reported this to the BetaNews guys, hopefully the problem will be gone if it isn't already!