WordPress 2.3  has been released and I have updated this site to it without any problems.
Copy + Paste from Development Blog 
- Native tagging support allows you to use tags in addition to categories on your post, if you so choose. We’ve included importers for the Ultimate Tag Warrior, Jerome’s Keywords, Simple Tags, and Bunny’s Technorati Tag plugins so if you’ve already been using a tagging plugin you can bring your data into the new system. The tagging system is also wicked-fast, so your host won’t mind.
- Our new update notification lets you know when there is a new release of WordPress or when any of the plugins you use has an update available. It works by sending your blog URL, plugins, and version information to our new api.wordpress.org service which then compares it to the plugin database and tells you what the latest and greatest is you can use.
- We’ve cleaned up URLs a bunch in a feature we call canonical URLs which does things like enforce your no-www preference, redirect posts with changed slugs so a link never goes bad, redirect URLs that get cut off in emails on similar to the correct post, and much more. This helps your users, and it also helps your search engine optimization, as search engines like for each page to be available in one canonical location.
- Our new pending review feature will be great for multi-author blogs. It allows authors to submit a post for review by an editor or administrator, where before they would just have to save a draft and hope someone noticed it.
- There is new advanced WYSIWYG functionality (we call it the kitchen sink button) that allows you to access some features of TinyMCE that were previously hidden.
- Full and complete Atom 1.0 support, including the publishing protocol.
- We’re using the new jQuery whis is “800% faster.”
- Behind the user-facing tags system is a really kickass taxonomy system which, which adds a ton of flexibility. It’s probably the biggest schema upgrade since version 1.5.
- The importers have been revamped to be more memory efficient, and you can now add an importer through a plugin.
- Through hooks and filters you can now override the update system, the dashboard RSS feeds, the feed parser, and tons more than you could in 2.2.
- The new $wpdb->prepare() way of doing SQL queries.
- Finally there were over 351 tickets in Trac closed for this release, with over a hundred people contributing. This is the polish, the hundreds of tiny bug fixes and features that make WordPress what it is.
More detailed changes can be found in WordPress Codex .