This error sounds familiar to me. This may or may not be your issue, but I ran into issues with SM on one of my servers that the SmarterMail web server service would not uninstall after uninstalling SmarterMail through the Programs and Features section. The SMWebsvr service would hang around afterwards. Check the services manager and see if SmarterMail Web server is still there after you uninstalled SmarterMail. If it is, you are probably running into the same issue I ran into on my secondary server. When the service gets abandoned, the installer tries to put it back again but it's already there and the update halts with an error. I can't remember off the top of my head what the exact error is, but it's a fairly simple fix if this is your issue.
So when this happened, I got into the habit of first uninstalling SM on that server and then through the command line I executed: sc delete SMWebSvr The SMWebSvr service is the built in web server that comes with SmarterMail.
After that install the new update and all went fine during the update installation for me.