Sometimes it is not possible to upgrade without 'breaking' anything, particularly as the the time interval of the upgrade grows larger. It also depends on what you are running on your little server.
If you are only running static HTML, or PHP/Perl scripts you wrote - there's little danger, other than you may need to fix your scripts to accommodate deprecated functions, and possibly do a MySQL upgrade for your databases (if you have any).
If you are running things that other's wrote, like WordPress or Joomla - make sure the version you are running will work correctly with the new PHP and MySQL versions in the current version of XAMPP. Many scripts will need to be re-installed.
This is like a 'server move'. This is your responsibility to check. Use their Codex. Wikis, forums etc, to find this info. PHP and MySQL have made changes. You will likely need to 'migrate' your php.ini file (you will not be able to 'drop in your old one'). Some MySQL functions are now deprecated, particularly 'type=', this trips many older installation scripts.
The actual upgrade won't really be an 'upgrade'. It will be a new install that you migrate your data into. All the folders that you have created should be copied/saved to a different location (at least everything under htdocs) If you or applications you have installed use MySQL, all the databases should be exported via phpMyAdmin or a similar tool. I would export them one database at a time personally. If you have PHP scripts - be SURE to save your old php.ini so you can refer to it. The same is true if you have made changes to the Apache configuration. Save the \xampp\apache\conf folders.
The 'best' option is always to have both XAMPP versions available. One way to do that is to 'relocate' one of the installs to a different folder name. You will not be able to run both at the same time, but you also won't have the terrible 'oops' moment either.