First of all, be sure to make a back-up!
I don't know an easy way to update XAMPP with maintain your settings. I think you just need to set it up all again. Some settings can be copied, like httpd-vhosts.conf and probably the config-file for phpmyadmin.
XAMPP v0.3 is very old (june 2005) and it didn't include PHP 5.2.6 (which wasn't released by then). So I assume you must have XAMPP 0.7.3 or XAMPP 0.7.4.
As for PHP 5.3, there is a new bèta version XAMPP for Mac OS X available, which includes PHP 5.3. So if you really need PHP 5.3 now, you could pick the bèta for now.
Just updating PHP should be possible, then you need to download PHP from php.net and compile PHP yourself. As for compiling PHP, I haven't yet figured out how to do that, I only know that it could be done with Xcode.