Ok, I am going to explain my story best I possibly can.
I had Ubuntu up and running great.. I decided to upgrade versions, no biggie, right? I go into Terminal, and I type "sudo apt-get dist-upgrade". It gave me a message, basically telling me that I didn't permission, and I needed to be root. Then I didn't know I could just type into Terminal "sudo su" (I think thats the command) and I would become root. So I held control along with alt, and hit the F4 key. It went into what looked like DOS, but it wasn't, it was still linux. So there I typed "sudo apt-get dist-upgrade". It did its thing, and I rebooted. It wouldn't boot to regular Ubuntu, it booted to that DOS looking Ubuntu. I got some help on IRC, and found out that X Server was missing, or not there (or something, all I know that there was something wrong with X Server). It also told me in a little blue box at startup that there was something wrong with X Server, didn't understand it so I ignored it.
I couldn't fix my computer, so I decided that I would reinstall windows and try installing Ubuntu to my hard drive right off the disk. After Windows 2000 was installed I tried my attempt at booting up with the Ubuntu Live CD. It loaded like normal, except it didn't load everything. Its now just hanging there at a black screen with a blinking gray underscore (_).
I have no clue whats going on, but I loved the 20 some hours I had with Linux, and I would like it back, preferably Ubuntu.
From what I've heard dist-upgrade is quite often a bit of a gamble. I often even had issues with kernel version updates, as my network card isn't yet in the kernel on most distros (though it has since been added to at least Ubuntu since I moved to another distro), and my video card was too new to be recognized automatically.
Taking into account you'd be leapfrogging right over 2 releases, the risk of something going wrong probably goes up exponentially. You probably should have just downloaded the most recent release if you are going to attempt dist-upgrade in any case ;) Look at it as a chance to partition the drive better, fix any little mistakes you made last time and improve your installation skills if you need to format and start over. It probably won't be the last time you have to ;)
A bit of a case of if it ain't broke, don't fix it. The version you have should have *fairly* up to date packages (it is a long term support version), so if you can install it and and just do all the recommended updates as they come you should be pretty good.
Remember there is a new version out in a few weeks, so may not be worth downloading an iso right at the moment, just make do with what you've got until then if you really want something right up to date.