It'll save it all automatically. All your profile info like bookmarks, cache, passwords etc is actually saved in an seperate folder (in WinXP it'd be Docs and Settings / Application Data, I think) from the folder you installed Firefox too. To upgrade, the easiest thing to do is just completely delete the old FF installation folder in program files or wherever it is and then simply install the latest FF fresh to wherever you want it. If you're not comfy deleting the old folder rename/move it. Just don't copy the new version overtop the old version!
When you start the new FF, it'll remember you bookmarks and settings. One good thing about 1.0PR is that it will automatically disable all your extensions/themes that no longer work with the new version, but it never hurts to manually deactivate all extensions in your old FF before installing the new one. If you haven't upgraded in a while most extensions will be broken anyway until you reinstall them, but again 1.0PR is much better at handling that stuff for you and will actually search for and install extension updates itself if you want.
If you want to be extra careful export your bookmarks to a backup html file on your desktop before you start.