Previous upgrades have been very smooth; once 8.04 is official, your Update Manager will notify you and offer to upgrade. It's not all that different from the regular security updates, just a lot more packages. However, they still have some wrinkles in that, so I would recommend that you try the Live CD on your hardware before you take the plunge. A lot of packages and dependencies change between major releases, and sometimes, it turns out that an older version still works better.

Personally, I actually keep two boot partitions, and all my own stuff on a separate partition, so I can have two releases installed in parallel and dual-boot between them. It was useful when 6.10 worked with my scanner but 7.04 didn't. (No problem with 7.10 there, so I have been running that exclusively since it came out.)

Having said that, there are also still some things which work better from a reinstall; migrating from an older version to a newer one will not give you exactly the same result e.g. when it comes to Gnome settings in your home directory, Firefox plug-ins, etc etc. Usually the differences are harmless but it might still be something to watch out for down the road.

I've been running the beta for a week or two on my computer at work (sic, my production system) and would say that the upgrade to Firefox 3.0 alone makes it worth upgrading, but YMMV.

I definitely recommend trying the persistent USB stick; saves you from burning a CD you only use half a dozen times, and real handy to keep in your pocket just in case. It's not entirely trivial to set up but the instructions on the wiki are pretty decent. https://wiki.ubuntu.com/LiveUsbPendrivePersistent