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the proper way to upgrade a module that HAS NO DATABASE CHANGES made since the last version, is the way you describe: upload the newer files to the server, overwriting the old ones. Then, you update the module using the system admin, modules panel.
If a module developer has made changes to the module db structure, the only way you can upgrade and keep your data, is when the developer supplies an upgrade script. There is no ther way, I'm afraid.
Herko