1. When the time comes you will have the upgrade instructions. Till then read all the older tutorials re: upgrading.
Upgrading_WordPress_Extended – the idea is always the same.
2. http://codex.wordpress.org/Plugins/Plugin_Compatibility/2.7
Upgrading from 2.6.3 to 2.7 is exactly the same as upgrading from 2.6 to 2.6.3. NOTHING HAS CHANGED.
Now, once 2.7 is released, and once it is installed, you will then have the ability to use the automatic upgrade process for subsequent upgrades, such as 2.7 to 2.7.1.
Hmm, thanks for a QUICK reply!
Whether your theme is compatible depends on the theme, same goes for the plugin. I can just tell you mine were just fine with the beta releases of 2.7, and a few days ago or so the theme author released a new version of the theme that is fully compatible with all new functions of 2.7 (before, the theme worked fine but I wasn’t able to use the new functions such as threaded comments).
All themes will be compatible, nothing will break along these lines.
Themes will need to be updated to use the newer features, like threaded and paged comments.
I put the Red Business theme into WP themes dir, on my localhost. Its not showing up, that can I do now?