I've to admit that when I've to update software stored on ROMs, I've always a bit of panic... 
However, this evening I've decided to update my I-mate SP5m with the latest version of Windows Mobile 5.0 (known as AKU2), a major upgrade that fix some known issues (my big noise was the limit to have at least 4Mb of free memory for sending and receiving MMS) and that adds lots of new interesting features (this new upgrade is required to receive real-time email from Exchange 2003 using Direct Push Technology).
The upgrade was good and quick, only few minutes to have a new and fresh device (it requires Activesync 4.1 or better). 
Obviously, when you update your ROM you loose all your data stored on the device, so some software must be reinstalled. What sometimes is good (on my device was exactly so for lots of applications) is to store applications not on the device memory but on the storage card: when you update you ROM, your application will be ready to work without a new setup!
The new application I had to reinstall completely was the .NET Compact Framework 2.0 because also in this new update the .NET Framework installed is the 1.1 version. Why not embed the new Framework on the package? 
I want to remember that, if you have Visual Studio 2005 (and the Mobile SDK) installed on your machine, you can directly upload on your device (via ActiveSync) the .NET CF 2.0 CAB file, located here:
C:\Program Files\Microsoft Visual Studio 8\SmartDevices\SDK\CompactFramework\2.0\v2.0\WindowsCE\wce500\armv4i\NETCFv2.wm.armv4i.cab
Now all is good and I've a new software ready to go... 