Hi Gavinash,
You're almost right on the money :)
If you have a mix of 32 and 64 bit clients, assign both the 32 and 64 bit installation packages to the group you are upgrading. When the client checks in to upgrade, it will pick the correct package (32 or 64 bit).
When I'm first testing an upgrade, I make a new sub-group (usually called Upgrades) under the group I want to upgrade. I leave Policy Inheritance on so clients will still have all their correct policies. Then I assign the new installation packages to the sub-group, move my clients into that group, check them as they upgrade and then move them back to their normal group when they are done.
That way you only affect the clients that you want upgraded.
Hope this helps,
Steve