As I said above.
It’s not complicated at all, it has a default location in the appdata files. You can use any other location but if it doesn’t find this location for whatever reason (I’m the wrong to ask about a “why”) it will suggest the default path with an obviously full download if there IS no content. It’s on the page that tells you that there is an update and you click to download right below this path. I don’t see how this can be any easier, all we have to do is read a couple of words.
Other programs use the windows registry and read the path from there. I don’t know why MSFS doesn’t do that but I assume it’s how this XBox stuff on PC works.
Most likely what I wrote above. It’s the typical case what happens. My install path is simply E:\MSFS and if I see anything else there I point it back towards my installation, it recalculates and only updates what needed or simply nothing at all.