As a rule, I always advise a "clean" install from a freshly formatted partition. The advantage of starting from a "clean slate" is just that...you know that there will be no chance of leftover apps, reg entries, incompatibilities, etc. interfering with the stability of the OS.
Having said that, I must admit that I recently did "the dirty" (installed overtop an existing Win98 OS) on my main PC, and I've had no issues whatsoever. It was purely for the sake of convenience, as I would have had to reinstall a lot of stuff if I had done it "clean". Also, I was interested to find out what kind of issues I might run into from a "dirty", it would be handy for me to know when/if I need to upgrade users.
I should clarify, I pay very close attention to the performance of my various PCs, am always careful about what I install, and consistantly keep good maintainence habits--much more so than the average user, so I was confident going in that this PC was relatively "clean".
Also, during the upgrade process, W2K performs a system check on the PC and produuces a conversion report that lists any possible issues with hardware, software, drivers, etc. If you choose the upgrade route, take a close look at this report so you know what you are getting into...