If this is an update to the application then, it is really only possible through custom actions as Mark Hall suggests. However if it is a complete installation of the application then it is possible to force a uninstall of the previous version and the reinstall to the new version to the new folder.
To answer your question. No there is no built in way to rename your directory before install through the Visual Studio Setup Project. If it could be done it would need to be through a Custom Action See this MSDN Forum link on Custom Actions and this Forum Link also.
Your best bet might be to to a full installation and then copy any settings from the old directory to the new directory then delete the old directory. That can be done running a Custom Action during the commit actions of the setup.
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