IF you do it right, all your important data and settings should be in your home directory, but... it really, really, really depends on how much system-wide stuff is also important, too. Drivers especially, but there are system-wide configurations you may have never realized were that important. I mean, almost all of them are in /etc/ where they belong, thank goodness, but... yes, it depends, is all.
Anyway, in-place upgrades are supposed to be really easy and problem-free, but in practice they rarely are. Usually, when I upgrade distros, I usually make a list of what I have installed, go down it manually and check the ones I will want installed for the new version
I do not keep my home directory on a separate partition, but a lot of people do. That way, it’s usually not a problem to wipe the system but keep the files, since the same applications don’t change a lot between distros (even OSes!). All you have to do is add the appropriate line to fstab to mount the partition (actually, the normal thing to do in this case is usually to mount the partition as /home/ so you get /home/root/ in there too, but ain’t no rule says you can’t).
Making new partitions and replacing system data can involve dangerous voodoo, not going to lie about that. Oh, it usually works just fine these days with a minimum of accidents, but partitioning on a drive with important stuff on it is still a serious matter that is best done holding your breath, walking backwards around the laptop in a circle three times, wearing a dead chicken on your head... and then there is the added headache of dealing with GRUB (or LILO... do people still use that? well, of course they do, but I mean in general?). But once it’s set up it’s not that hard. Not sure why anyone would suggest something else.
To download an ISO without an all-night connection, have you considered using a method of download continuation or is it just too spotty? It’s usually as simple as wget -c [url] on the command line; just ctrl+c when you gotta leave, then run the same command when you have a connection later.