I see. The problem with this is that Auto Updater does much more than just downloading and extracting the files. It deletes obsolete files, updates the profile actionmaps, installs new dependencies, etc.
Not really a problem, since I'm using the Auto Updater to do the installation, just not the downloading. My suggestion implied a clean separation between looking for an available update and selecting the relevant one (at prompt time), the downloading itself (through the Auto Updater itself or an alternative means), and applying the update (either automatically after a download or at user's request through an install update button). I was going to say the real problem would the possible amount of code rewriting involved, but then I reread the OP and remembered you're talking about a complete rewrite, not an incremental update, so that's a moot point ^^.
Also, it's a confirmed feature that the Auto Updater will be able to download and install multiple updates without extra user intervention: this is especially useful is you consider installing from 0.4.0 -> 0.4.9.
In a scenario where I'd have MWLL 0.4.0 installed and every subsequent patch archives, I could choose the automatic update, or I could apply each patch successively with an "apply update" button. I'd like to have that choice.
If that option isn't considered, I'd like to be able to do with a multiple update the same thing as I'm doing right now, i.e.: start then cancel the update, use the .torrent files for all planned updates that can then be found in Updates sub-folders, and re-run the Auto Updater once the downloads are finished.
If for design reasons, the Auto Updater can't retrieve all .torrent files at once (it needs to install version n+1 before looking for n+2), then I'm out of luck, I guess ^^.
What I can offer as a compromise: after the update has been downloaded, the Auto Updater can try to register the torrent with the torrent client installed on the user's machine - providing the user wishes so. Communicating with other torrent clients may be tricky, but I'm willing to explore that option.
Getting another client to start the download wouldn't be tricky at all – just "open" the torrent file and the registered client should pop up – but automatically directing it to the correct directory... that's probably more than tricky, and downright impossible. No use in automatically starting the download with another client anyway if we still have to dig our way through the seven or so folder levels the updates are buried into – because that's the tedious part. Ok, self-imposed tedium... but still

.
So let's take the easy way: add a button to open the relevant MWLL.x.x.x-to-y.y.y folder. The torrent will be just there to be double-clicked, and the path will be readily available to cut and paste into the torrent client. It would also make it easy to access and backup the update after download, so that could also be useful for people using the embedded client.
Of course if you have any other suggestions (regarding this issue, or any other issue), you're welcome to share them here!
Well, with regard to the "preserve update files" option, I may have some.
First, I'd like to have it work at all

Second, I don't know if it is supposed to preserve the torrent file too, but I'd like it to be the case.
And lastly, I'd like that setting to be persistent. After all, no much use in keeping only some files, you either want them all or none. I think it reverts to unchecked each time right now, but honestly I didn't pay it much attention since it doesn't work yet.
And I think that will be all.
No wait, it's not: now that I think about it, a "smart" Apply update option might be able to detect consecutive updates in the same folder (the naming scheme seems rigid enough) and apply all of them at once. It would then almost fulfil the role of Siilk's offline repository. Without the cumulative part, so it wouldn't be space-efficient (how many GameData.pak copies? ^^) but it would provide the main convenience: easy reinstallation.