Directory.Move errors were a common problem for WAU.
I know i have had to add several Directory.Exists() checks. I havent seen your code though, you may do stuff differently.
EDIT Looking at the code, (just a guess), but the program probably deletes the files in remove.conf, but for some reason doesnt delete the existing module folders when updating them, so only those modules which you have set to delete get moved from the addon's directory (then they are deleted by remove.conf)
WAU moves the directories into and out of the main addon every time it updates, but that is more to allow for recursion. I'm not really sure how your code could work (for packages) without delete before extract on, but i only looked at it for a couple minutes.