Yes. As far as the system cares, those are two different files. AFAIK, you can't have a file in the GAC and have it be in a random folder on the target computer at the same time.
Theoretically, if it's in the GAC, you don't need it in the product directory. If it's in the GAC, that will be the version loaded, not the one in the product directory. However, it gets harder if you need to, say, register it for COM interop too. I may be wrong, but when I tried, I had to have both: one in the directory, one in the GAC.
But really, you probably don't need it in the GAC if you need it in the product directory. If it's being loaded from any program anywhere, always, then the GAC is a decent place for it. If you're putting it in the GAC For COM interop, that's unnecessary; registering it by pointing it to the folder that you've installed it will work fine if you have installshield configured correctly.