I have a Windows service written in C# using VS2005.
The installation is via a wizard that calls msiexec to install the msi file also created using VS2005.
I am
There are several things that need to be done to get "upgrades" to work with MSI's if you want to automatically remove the previous version.
First some background information about the mysterious "codes". There are 3 codes (GUID's) associated with an MSI:
The Upgrade Code should never change. For you upgrade scenerio, the Product Code must be changed for each version. Additionally, as you mentioned, you must bump the version number. The Product Code and Upgrade Code can be found by selecting your setup project and going to the Properties Window. The Package Code is hidden in Studio and will always be updated.
The item you are probably missing, is that you also need to set the RemovePreviousVersions setting in the Properties Window to true.