Can't help you with the install - I played DKS on Steam so it happened automatically for me.
But there's an easy test to see if you have Patch 1 - check the difficulty slider on the options screen - if it goes up to 'Nightmare' difficulty, then you're patched. As for the rebalancing, I remember level 8 +Magic Damage on a weapon went from 70 points pre-patch to 50 points post-patch (Although level 10 remained at +100).
There was a patch 2, but it only seemed to fix compatibility issues, not change any gameplay mechanics. My 'Divinity2.exe' is currently at version 1.4.9.70, which is patch 2.
