Here is a great blog post on DPM2007 – 2010 Upgrade
However I would also use dpmbackup tool.
You can find this in C:\Program Files\Microsoft DPM\DPM\DPM\bin
So open a command prompt with elevated privlages and set your current directory to the bin folder in DPM then run dpmbackup -db
But where does the backup go?
You can find it in \Program Files\Microsoft Data Protection Manager\DPM\Volumes\ShadowCopy\Database Backups and it will be named DPMDB.bak
So if the upgrade goes wrong at least you have your DPM Database backed up!
So an inplace upgrade really is quite simple.If you have not killed the DPMRA executable you will be prompted to do so during the upgrade.
Once the upgrade is complete , Reboot the server and then apply the March 2011 Dpm Rollup which you can download HERE
Upgrade all protected machine’s agents and ensure communication is ok with all agents and thats it!