I described performing an in-place upgrade in tip 3920 » How do I perform an in-place upgrade of Windows 2000?
When you perform an in-place upgrade:
1. Service Packs, hotfixes, and IE upgrades are rolled back.
2. Default registry values are restored.
3. Default permissions are reapplied.
4. COM and WFP are reregistered.
5. Plug and Play devices and the HAL are re-enumerated.
6. Drive letters are changed based upon the current drive and partitions. See Q2324048 - How Windows 2000 Assigns, Reserves, and Stores Drive Letters.
The following is NOT changed:
1. Installed components and programs.
3. Third-party registry entries.
4. The computer's role.
NOTE: If you upgraded your computer from Windows NT 4.0, profiles were stored at %SystemRoot%\Profiles. The in-place upgrade creates a \Documents and Settings folder and changes the registry profile to point to it. To fix the problem, use the Registry Editor to navigate to HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\ProfileList. For each user, there will be a SID sub-key and a Value Name of ProfileImagePath. Change the string value to point to %SystemRoot%\Profiles\<UserName>.