The easiest way to upgrade from AVFP 2 to 2.1 is to delete the AVFPdemo2 and AVFPdemo2r Virtual Directories before running the new setup. Do this by right clicking those virtual directories in the IIS Management Console and choosing delete. When running the new setup choose a different directory than the original AVFP2 directory.
If you don't these things beforehand, you'll just get a messagebox popped up that says the same thing - not a big deal.