My main PC is a dual boot 10.2(64bit) / XP system.
I have the HD partitioned into
Partition 1 XP
Partition 2 /
Partition 3 / swap
Partition 4 /home/~
What is the most ‘painless’ way of upgrading?
Reinstall and possibly keep /home as is, but if it were me, I would do a /home backup and go all fresh, just bringing back you important personal data, email, etc… I don’t think I would even keep the desktop settings.
It’s painless enough, just take you about an hour, install of 11.0 for me is 15-20 mins, then add in all the 3rd party stuff and your done.
Remember 11.1 is out next week.
Just to add a tad to @caf4926’s post . . . be sure you are using the DVD to install, but it would be a good idea to have the Live-CD as well. 10.2 - 11.1 isn’t trivial. Don’t be surprised if you have to get into the system later to fix something - and both the DVD and CD have their own unique advantages. In the package installation step, I advise adding the “nano” command line editor; comes in very handy. And definitely go with 11.1 after release.
If you are using KDE, the new 4.1 will be fairly different to you. You might want to upgrade only 3.5 now (or in a clean install, install both 3.5 and 4.1 - they can co-exist).
Where you may have a little trouble is with the different kernel. There was a major change at 2.6.2x (you are probably on 2.6.18) which changed disk/partition naming so that they always begin with an “s” instead of an “h” (this is the scsi/SATA convention). On some machines, the change resulted in the disks being seen in a different sequence. Your optical drives will still use the “h”. Portable devices are handled differently, too. The upgrade DVD will probably change your fstab (which controls mounting) and grub configuration files (device.map and menu.lst) to accommodate these changes, but I had seen occasions where the files had to be patched up from the command line after upgrade.
The above are some of the details behind @caf4926’s suggestion to do a clean install. Using the LiveCD can be a good method of checking how the hardware will do with the new kernel.
Finally, bear in mind that anything you added yourself (such as multimedia from Packman) will have to be updated after the upgrade . . . including the proprietary ATI or nvidia video driver (which is a relatively common issue, sometimes requiring a little command line work after installation to get the newer driver).
Good luck.
I agree with Mingus725. There have been so many changes that an upgrade will be a nightmare. Just back up your files and do a clean install. You will save yourself a lot of grief.
I second the idea of having the DVD and the Live CD on hand. It’s great advice. For everyone. 
Thank you all for your replies, and advice.