Stutley,
I have a very slow but steady method that is much less scary.
I have a separate subdomain http://www.domain.com/blognightly/ and play there with a couple phoney blogs(in a separate db as well). A "sandbox server" so I'm told.
I then COPY my current themes/plugs/hacks/blogs.dir/ from my working install into the /blognightly/ and see if all is well. I fiddled away for days (couple hours here, there) till the new was "stable" and presentable. Making my custom home.php look nice with wp-signup.php instead of wp-newblog.php took a bunch more time than I thought. It takes a while to scour for error_log files, displaced widgets, broken path javas in K2 for example, etc. (I'm a no vhosts, AKA subdomain, install. WARNINGS re paths in the database tables if you are too!).
Even more impressed with wpmu now!! It plays perfectly with subdomains as far as I can tell.
The last step is to move all files of current into an /old/ folder.
Then move all from /blognightly/ to /www/. And edit the config.php to hit the right database. IF/when you can get to the Upgrade link, hit it. Wait as it chews through the blogs 5 at a time. Done.
/old/ sticks around incase I missed a css hack here, or plugin tweak there. I'll chuck it after traffic to my site picks up in September.
Download a new nightly into /blognightly/ and start again.
I don't rush to delete anything. Renaming a file.php to oldfile.php has saved my bacon a few times(especially the old htaccess)
As well, before the big move, I widgetized 100+ more themes. Added a handful of new plugins and widgets. Only side effect of the whole deal was many blogs flipped back to Kubrick as default. I use a userthemes.php plugin and many users where immune to my jibbing with the system themes anyway (I learned just how important the /blogs.dir/ is).
D. Sader