Owerwrite all the old files, thats basically what david himself will tell you or ask you for a few bux to do it, I have never upgraded with the guide they provide without having problems.
I know I am already helping you on two of you other directories. If you need help with this one too, let me know.
Yes, you are working on other 2 directories.. My last and 3rd directory also got problems now.. Sent you details. Get back soon.
Make a datatbase back up first, just incase and make a back up of file..Public_html<--back up that aswell. When ready, simply delete all of the files from your web server(site) and upload the newer version. After all of the uploads are completed. Go and type http://mysite.com/install/ and follow the steps and add your DB info and later username and password. After that, it will say to delete the Install folders and bring back the writting permission to the config.php file
But what about the admin folder in there? I am sure u will get validation and other smarty errors if old admin files are used.
Over writing files, one can also upload templates folder. If you have a custom templates inside template folder with a different name, it will not get affect or deleted coz we are doing simple overwriting of existing files. But yes one needs to make sure ur old custom theme supports the new version.