Charlie,
Yes, you can just perform an update using the update manager and you should be good to go. There’s really no need to do a completely new install, but that is always the most “risk averse” solution since it doesn’t touch your existing, working configuration. We’ve done lots of tests with the update scenario and had no problems with it though. I’d suggest you update in the following order: MyEclipse to 5.1.1, then Eclipse 3.2.1 to Eclipse 3.2.2. Of course, by the time you’ve done all that, the time spent might be about the same as just downloading the “all-in-one” installer and putting down a new instance that has everything preconfigured. Truthfully, that’s what I always do, but either is fine.