a. People that renamed the app or folder will not be able to update until they change the names back to the original "Adobe Photoshop(R) 4.0". Doing a reinstall from the original 4.0 CD is also an option to get a "pristine" install from which to update. Note more importantly the name is Photoshop(R) (option-R) not (TM) or (C). "Photoshop" is a registered trademark and uses the correct mark for it.
b. The updater will not delete the old app unless the user confirms the deletion from a dialog at some point. If everything is named as the installer expects, there will be no dialog requesting to delete a file.
c. The updater does not check for pirate serial numbers. However it does require finding a legitimate (i.e. release version, not beta) Photoshop 4.0 app before it will update any files, including plug-ins.
d. The update does contain a fix for the Save As> CompuServe GIF crasher as well as a number of other bugs.
e. In general, doing a clean install from the 4.0 CD before updating is a guaranteed way to make sure the update goes smoothly. Since the preferences file is not touched, you won't lost any settings, either.