I just upgraded to CentOS 5.5 and while talking to a friend of mine we got into talking about updating vs clean install. After my update I had to restore to an image before the update as my mail system was not working, checked all packages contained in the update and zeroed the cause to a sendmail update. Which was disabling my current MTA “postfix”. I fixed that and another issue with my open office and I was ready to go. While my friend prefers to just do a clean install.
To me it just comes down to preference, if you have a heavily customized system it’s time saving to just do an upgrade, but if you are running a generic system with few modifications a clean install might be the best way for you.