Here are some items to consider when upgrading to vSphere/vCenter 4.1:
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vCenter 4.1 requires a 64-bit OS.
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Windows 2008 R2 is now officially supported with vSphere 4.1.
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When asked what account to use for the service, the local system option was greyed out. I had to enter my current credentials, then go back after the installation completed and change the service account to local system.
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The Update Manager can upgrade VM hosts. I had to get the hosts up to version 4.0 before it would work, though.