I upgraded by uninstalling FF using Add/Remove Programs in the Control Panel. When asked if the Firefox folder should be removed, I chose 'No'. This left the Profiles folder and the Plugins folder (with the Shockwave, Flash plugins in it) intact. Then I clicked on the downloaded Firefox.EXE file to install the updated version. Once installed, clicking on: 'Help > About Mozilla Firefox' showed the updated version number, so it looks as though it updated OK.
I always like to make sure the old version is uninstalled first. It saves there being any chance of double entries in Add/Remove Programs and is maybe just a cleaner way of upgrading. But anyway, the important point is that, one way or another, FF ends up working with the correct version shown in 'About Mozilla Firefox'.
I read that some have done it by clicking on an icon that gets displayed in FF when updates are available. You may not have seen this yet but it does come up if you wait long enough after updates have been released.
I'm sure lots of other people have upgraded the way you did and all has been well. It's all a matter of preference I think as all ways seem to work OK (as far as I know).
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