2
you are correct in removing the modules.
for upgrading, in most cases what you need to do is (you don't need to deactivate and uninstall):
1) copy the newer version to the directory (replacing the current one) and 2) hit the 'update' button (the install button will change to update, once you install a module). it's that simple. [in some cases: you need to run the upgrade script, to update the table structure, etc. - read the upgrade doc included in the module for this ]