I usually buy a new hard drive for upgrades, they are cheap. For the past couple of years, I've kept my OS files on a SSD, and data on a second hard drive. You can move my documents, my pictures, my videos, my music, and so on to the second hard drive.
Then, when I do a upgrade, I only have to deal with the SSD and my images and lightroom catalog are safe. Everything is backed up, in any event.
The advantage of a new hard drive is that, in the event something goes bad, you can always fire up the old one and start over. After a year or so, I wipe the old one.
With Windows 8 coming out soon, it seems a shame to be forced to upgrade right now. I don't expect windows 8 to be a huge improvement from what I've heard, so I may not upgrade even though I get the Microsoft Employee price from a relative.
As to upgrading LR 3, backups are critical. The first time I imported my LR 3 catalog into LR 4, something glitched and I ended up with three copies of every image in my image files, and a 38 GB lightroom catalog. I restored everything from a backup, and it was fine.
I do notice that LR4 runs about as fast as LR3, so I'm happy with it. I'm using a trial copy while waiting on my upgrade order to arrive.