WordPress 2.9 is out, and my mail is truly full, with questions whether WordPress automated Upgrade still works, and whether it'll let you upgrade to WordPress 2.9.
As I have answered this question during the past, WPAU barely relies much on the essential code in WordPress and generally works on its own. So the solution to whether WPAU will work to upgrade WordPress 2.9 is a huge YES. I myself upgraded few of my blogs using WPAU, since I like it to the in-built upgrade. If you've been using WPAU, you can rest be certain that it'll keep working for any future updates in WordPress. I swear to update it, if and when it stops working with any new versions of WordPress. If you're looking to upgrade the manual way, visit the WordPress Codex entry and obey the directions to upgrade your blog to WordPress 2.9. Don't forget, whichever option you select to go up to WordPress 2.9, always make efforts to create backups of your database and theme files, WITHOUT FAIL. Asides, I've been monitoring the WordPress forums for any issues with an update to WordPress 2.9 and have not seen any major one's at this time.
One issue I did see was that you will need to have at-least MySQL 4.1.2. My recommendation would be to employ a website host who supports both PHP five and a higher version of MySQL