Right, so it does require admin rights to install. That's not a problem.
Now let's break down the rest of the questions here!
From my point of view, I have no way of verifying that the launcher is not malicious, since I have no way of auditing the source code(I don't believe that danpaul has written any malicious code). While this launcher does not do anything bad, here's a hypothetical situation for you. If I was able to hack into the webserver and upload a malicious version of the launcher, everybody would go and update it. They start the new launcher, click 'yes' to allow it to run with admin privileges, and then it could potentially have full control over the computer.
Here's an analogy for you: if you're running a hotel, do you give everybody who checks in a master key? No, you give them just the key to their room.
It's more a question of one program that is doing several things. If it is only starting up games, great! it doesn't need admin privliges. It's only when it's installing that it needs privileges.