If using the Installer project (VS Setup project) and not a Clickonce project you will need to take care of scripting the uinstall/new install sequence yourself.
Use Clickonce if you want automatic version updating and version rollback capabilities to be self managed by the user. Otherwise setup project and control msiexec.exe yourself.
So to clarify...
Your could add a custom installer class to the Install state of your setup project and do the uinstall via code (based on a detecting if any previous versions are detected in the registry/File system).
Another alternative (and easier to do for most) would be to write a seperate batch file or VBS (or PSH) script that first runs a msiexec.exe /u "{GUID}" followed by a msiexec.exe /i "{installer}"