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When you change the installation folder for Internet Explorer, the folder to which the installation files are downloaded does not change.
For example, if Windows is installed on drive C and you choose drive D for the Internet Explorer installation folder, the download folder (typically named Windows Update Setup Files) is created on drive C instead of drive D.
Internet Explorer Setup handles the installation and download folders independently. The default for the download folder is to create the folder on the drive on which Windows is installed. This is independent from the specified installation folder.
To change the download folder, choose the custom installation option, and then select the Download Only option. You can then specify the download folder.
Microsoft has confirmed that this is a problem in the Microsoft products that are listed at the beginning of this article.