Windows Home Server stores certain files in the home server shares, because they need to be available in a variety of ways. Included are the Windows Home Server Connector install files. Power Pack 1 documentation includes a list of the critical folders, which should not be moved or deleted.
If you have deleted them, you will need to recreate the connector software folder to upgrade the connector when you have installed Power Pack 1. The only supported way to recover that folder if it has been removed is via a server reinstallation. However, you may be able to recover by:
Recreate the folder "Home Server Connector Software" in your Software share.
Create a folder "DOTNETFX20" in the "Home Server Connector Software" folder.
Create a folder "WindowsInstaller31" in the "Home Server Connector Software" folder.
Log on to your server using Remote Desktop. Be cautious when logged in in this fashion; it's unsupported, and there are tools available which, while familiar from other operating systems, may cause severe issues (up to and including complete data loss) when used on a Windows Home Server based computer.
In Remote Desktop, copy the following files to "\\localhost\Home Server Connector Software" (Note: there is a .cmd file which should perform this step: C:\WHS\ConnectorInstallAssistant.cmd):
In Remote Desktop, copy the following files to "\\localhost\Software\Home Server Connector Software\DOTNETFX20":
In Remote Desktop, copy "C:\redistr\WindowsInstaller-KB893803-v2-x86.exe" to "\\localhost\Software\Home Server Connector Software\WindowsInstaller31".
There may be additional steps required in order to completely restore connector installation functionality, depending on whether you have made other changes to your server.
If you have an OEM product (an HP MediaSmart Server, for instance) there may be additional files and folders required by the OEM extensions to the WHS platform. In this case, you may be forced to perform a server recovery according to the instructions in the manuals you received with your server, as I see no easy way to recover those files.