1. Gauranteed to be lost:
All service packs, hotfixes, and driver updates.
2. "Gotchas"
A. You have installed new hardware and the hardware is on the WHQL list for XP. What happens is that XP will likely install an older driver.
Workaround do both of these steps:
i). Download and use the free utility: Windows Driver Backup
ii). Use one of these and printout the results:
Belarc Advisor:
AIDA-32:
Then after the upgrade repeat the process. Compare the driver versions for critical hardware. Both provide web links for new drivers.
B. You now have a pre-installed by the manufacturer version of XP Home.
Make sure you check with the computer manufacturer to obtain a full set of any driver customizations used. Usually you can download the driver set from the manufacturer's web site. The steps above should be sufficient, buy you never know.
C. You have a SCSI or RAID device.
Be sure you have downloaded and extracted to floppy any drivers needed for the hardware before attempting the upgrade. Don't forget scanners and other devices that required a controller board to be installed.
Corruption or lost data is possible. Backup your user profile:
1. Run the Files and Settings Transfer Wizard:
Note that this does not backup up your applications, they still need to be re-installed if they become corrupted.
2. If you have the ability to do a full backup, do so. You cannot use restore points after an upgrade attempt. You have already installed a utility that will do this for you, Advanced System Recovery:
To be honest I have done exactly what is asked in this thread many times without incident. My preference is a clean install, but I have not personally had a problem with the upgrade path.
I a clean install seems nearly inconceivable to you, follow these steps and go for it.
Remember: You need to re-install SP1 and all hotfixes after the upgrade.