I have just been through the process of upgrading to 2.9.5 and it all went well with no apparent problems. It was also much quicker that I had anticipated -- about 10 minutes in all.
Before I started I did back up the folders from the iLiad to my PC - however, as I have never put any personal content on it I wonder if I have to copy and paste the backup folder back to the iLiad? My books are always stored on the MMC. I did remove both the SD card and the CF card before upgrading and when I replaced them both I was pleasantly surprised to find the device remembered the last page of the pdf book I had been reading.
I downloaded and installed Mobipocket Creator 4 on my pc and have just finished making a .prc file from an .rtf file. I was pleasantly surprised at how easy this was. I could only test the book on the pc (Windows XP) but I was pleased with the way I could increased the font size in the reader. I think I could press the plus button about 10 times in all, so somewhere inbetween will be suitable for my preference. Also, the text flowed very nicely. I am really looking forward to having this programme on my iLiad.