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I tried searching "How to update VLC" & "update instuctions", I got 333 returns, the first 40 did not answer this question :

Do I need to remove VLC v0.8.4a befor I install vlc-0.8.5-win32.
Or will the new version install over the old version?

Dell DIM4500.
Windows XP Home Edition Service Pack 1 (build 2600).
1.80 gigahertz Intel Pentium 4.
768 Megabytes Installed Memory.

Thanks.

Yes! An Uninstall is appropriate, using your Control Panel's add/remove programs.