Does Windows Installer use Assembly Version or File Version to update dlls

Answer 1

Some good reading and discussion here:

http://social.msdn.microsoft.com/Forums/en-US/netfxbcl/thread/6ed4d384-f6e9-42ee-b485-0bf40d0abd65/

To answer your question, though, I believe that MSI's respect FileVersion primarily:

File Versioning Rules