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Remember before you start any WP updates to deactivate all the plugins through your Admin Dashboard, and make sure you have access to a current backup of your site.
The lowest level updates (3.0.4 to 3.0.5) are usually safe to do through the WP Admin Dashboard. You can do this through the Admin Dash –> Updates (or from the link at the top of every Dashboard page).
Mid-level and highest level updates are best done through the hosting account, where our preferred host (Bluehost) and some others offer the option to roll-back the update if it causes conflicts.
After you update WP and determine that your site still works, activate your plugins one by one, checking for site function after each.