by Bret Miller.
1) No, making a backup copy of moodledata does not prevent an error. However, should an error occur during upgrade, you'll need that backup (along with the database and moodile php files) to restore the site.
2) I tend to use the command line to install my upgrades. That way the only time involved is in extracting the files from the archive. If you must use FTP to upload all the files, do it to a separate directory (or create a subdirectory for it), then when all the files are uploaded, you can move the old files out and move the new files in without significant delay. Clients like FileZilla allow you to do that with drag and drop.