Personally I do upgrade-in-place -- my main home machine is an in-place upgrade from its original install of Debian 0.93r6 back in 1996 or so (with different hardware now, of course). Some upgrades have been hairier than others, but fixing up any fallout has always been much easier than doing a clean install, restoring user data and trying to recreate all the configuration tweaks.

Crossgrading from i386 to x86-64 was a particular bear, and I have vague memories that the a.out to ELF transition might have been awkward too...