Isso parece ser coberto razoavelmente bem em install.txt
incluído nos downloads zip do PHP.
Citando esse arquivo ...
Manual Installation Steps
... Upgrading from a previous PHP version: Previous editions of the manual suggest moving various ini and DLL files into your SYSTEM (i.e. C:\WINDOWS) folder and while this simplifies the installation procedure it makes upgrading difficult. We advise you remove all of these files (like php.ini and PHP related DLLs from the Windows SYSTEM folder) before moving on with a new PHP installation. Be sure to backup these files as you might break the entire system. The old php.ini might be useful in setting up the new PHP as well. And as you'll soon learn, the preferred method for installing PHP is to keep all PHP related files in one directory and have this directory available to your systems PATH.
Com essa ressalva, deve ser apenas uma questão de instalar uma nova versão do PHP na nova pasta e atualizar a configuração do IIS para usar o novo caminho.