> untar the 4.6.2 ball into and over the existing installation
> replace the existing installation with a fresh untar and move
> the modified .adp and .tcl files manually back
If you have lots of modified files then you would propably like to look into using a local CVS repository approach, using 'vendor import' for importing OpenACS code into your project. See http://pinds.com/acs-tips/openacs-setup for a good description how to do that.
> set up a new instance with a new database
No. After upgrading the files to the new versions go to /acs-admin/apm/packages-install and select those packages that have an 'Upgrade' comment. The apm will then present you with a list of sql upgrade scripts that it is about to run. The upgrade scripts contain data model changes, e.g. 'alter table add ...' when a new column has been added to a table. Confirm and cross fingers.
Note that there is a serious effort to make the upgrade scripts work between _final_ releases, e.g. 4.6.1 and the not yet released 4.6.2, not between beta versions, although they most likely work. If not please file a bug report.