Extract the DB, install new version, import DB.
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When you do the new install, DO NOT have it remove the "setup" directory. It will complain about it, but after you import your database dump you'll want to run the setup again in upgrade mode, just in case.
Then manually delete the core/cache directory, make sure your browser cache and cookies are cleared for the site, and it should go OK. You may need to re-install some of your extras.