Before upgrading to WordPress 2.9, WordPress team came out version 2.8.5 a hardening release. Upgrade to WordPress 2.8.5 was a smooth process. No issue so far on 3 of my blogs.
Major fixes on WordPress 2.8.5
- A fix for the Trackback Denial-of-Service attack that is currently being seen.
- Removal of areas within the code where php code in variables was evaluated.
- Switched the file upload functionality to be whitelisted for all users including Admins.
- Retiring of the two importers of Tag data from old plugins.
What are you waiting for? Just use the automatic update to upgrade to WordPress 2.8.5. 
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Saw this update Yesterday and the first thing which I did
was Backup my Db and updated the wordpress. Though wordpress are releasing very quick update..
Me too. Updated it directly. Just did a full backup of whole web hosting 2 days before WordPress 2.8.5 released.
I do not why but automatic update did not work with my blog.
already do that. Some of my blog at 2.8.4 and some at 2.8.5.