Daring Fireball's take:
Daring Fireball: I Believe in Murphy's Law: Here’s how I recommend installing major new OS releases.... First, make a complete backup of your current boot volume to an external FireWire drive.... Next, boot from your external backup volume to make sure that it works. What you want to see is something that looks exactly like booting from your regular internal hard drive.... I never skip this step. Next, shut down the computer, and unplug the external backup volume. The odds of an OS installation corrupting a plugged-in FireWire volume are very small. The odds of an OS installation corrupting a FireWire volume that is not plugged in are zero.
Then boot from the installer DVD, follow the on-screen instructions, and perform a default upgrade.... So, in short: Do a complete backup clone to an external FireWire drive. Test that the backup is indeed bootable and up to date. Unplug the backup drive. Boot from the installer DVD and perform a default upgrade.
If anything goes wrong in step 4, you have nothing to worry about, because you know that you have a complete, bootable backup. Most people, of course, skip directly to step 4. And the odds are it’ll work out just fine for them. I say, why take a chance?