Both the ways have some benefits as well as some drawbacks. In fresh install one has to make sure that the back up is taken for all the data he requires, as fresh installation will clobber your hard disk and will start it fresh. If in case you forget something to back up then the data will be lost forever. Where as in upgrading the software you do not have to worry about backing up the data. The software can get upgraded in the background , it won't effect your normal work. I would suggest upgrading to newer version.
Fresh installation is beneficial in cases you have a Ubuntu 8.10 or earlier installed and you are looking to upgrade it to 9.10. In such case you can't upgrade your system. In such a case what you need to do is the incremental upgrade up to the latest version which for me was a bit cumbersome job.
But for those who would like to upgrade it, here is what should be done. It's advisable to firstly apply all the updates available on your system before you go for the never version. It can be achieved in two ways graphically and from the command line. For graphically upgrading your system you need to create a mirror. I will suggest not to use the default mirror as it may take ages to upgrade your system.
To use an alternate mirror you need to
1)Move to the Update manager
2)Click on settings
3)On the drop down box click on download from tab and select other
4)Once done with this click on select best server
5)It will allow you to select the regional mirror
You then need to upgrade all the version of Ubuntu till the latest version. Now you are ready to move on to Ubuntu 9.10.
If asked I will suggest upgrading in comparison to fresh install.