So how do servers upgrade themselves to Windows Server 2008, and how does data, that is not part of the operating system get handled?
One of the interesting point to note is that in Windows Server 2008 the data that is part of the operating system, the registry and certain file locations are recreated during the upgrade. Secondly data that is not part of the operating system that is found in certain directories is quarantined. Details at the bottom.
I recommend that you make a clean install of Windows Server 2008, so that you have a good reference point and then go through you system testing from there. While the upgrade process has become more consistent with Windows Server 2008, there are still small paths that the migration could take which could make your OS install unique, and give you no reference point for testing ( which is what all ITPROs really do not want ).
The details below comes from a few white papers on the subject which I think will be interesting for those special cases when you need to do the upgrade.