It could be a write permission issue. Vista is more picky about where users can write. My suggestion is to re-download the latest snapshot provided on the website, unzip it to a folder on your Desktop, and then run Update.bat and see if it works. That's how I've been running it on Win 7 and it works fine.
Update.bat (really rsync.exe) used to be unstable on Windows. This was an up-stream problem (read: not our fault), but I'm fairly certain that maci compiled a proper rsync.exe which fixed, or at least improved, the stability issues. Can you confirm that you're running the latest snapshot? Re-download the quake2world-win32-snapshot.zip, and try again. Update.bat should take at least 5 minutes the first time you run it, as the game data weighs in at about 200MB these days.