4
*usually* a full module release will contain the complete set of files. if it's just differential files, that would likely be noted.
and yes, just upload/drag the files into your ftp client, overwriting the similarly named folders/files.
i believe there's a module that you can install, which will back up the sql database
edit: regarding deleting the old module first, you can either overwrite or delete, should work fine either way, just make sure you have a backup of the original files.