Scott-
Ok, here's the deal. For some reason, LimeWire failed to bring you to our web page when you clicked that you wanted to update, probably because the browser launching code on the Mac in 1.7 is not quite as robust as it is in later versions.
As you said, you can manually download the new version from our web site at:
http://www.limewire.com/index.jsp/download
Before installing it, however, I would recommend deleting everything from your LimeWire 1.7 directory, except for any downloaded files that you have there. Then, when you install the new version, you can either install to the same directory where you installed 1.7, in which case all of your old files will appear in your LimeWire library, or you can install to another directory and add your download directory from LimeWire 1.7 to your new LimeWire's shared directories in the Tools>>Options window under "sharing." This is because the LimeWire library only shows the directories that you are sharing.
Either way, you will never lose your downloaded files unless you manually delete them (either within LimeWire, or from within your Finder).