Do you mean can you install the update without removing your existing LW? Then yes - your existing version gets removed automatically as part of the installation process. But just remember that if your existing version's Pro then you'll lose that version unless you have the Pro installer saved.

Are you running XP or Vista? I have XP & installing SP3 made no difference to any p2p apps' connection.

I guess you've tried all the fixes here: If LW 4 Will Not Connect

Which version are you updating to?
Some people have had issues with LW 5 - it's quite different to LW 4. Make sure to read the LimeWire FAQ and User Guide

There's a Beta version out, if you don't mind using a Beta, which seems to be quite good so far... some tools that were missing from 5.1 are slowly returning: LimeWire 5.2.2 (Beta) - Lime Wire

Check out the changelog to see exactly what's what: Changelog - LimeWire