I upgraded to Service Pack 1 when it was offered by automatic update.  I have my PC set to notify me when updates are available but let me choose to install them.  I usually check with Windows Secrets newsletter before I install an update.  Susan Bradley writes a great column on watching for good and bad and important patches.
MS Update offered me a patch for my audio module.  I learned by reading that I should take it because I couldn't update to SP1 unless I did.  So I installed it and then installed SP1, and had no problems at all.
I did a full image backup of my hard drive before, just in case, but I didn't need it.