Hi,
Answers to your questions
Question : After taking database backup . Proceeding further with the up-gradation will it over write the same Database file of the SQL server for 12.1 or else i need to create another database instance for SEP 12.1
Ans : No need to create another database instance, it will over write the same database
Question : After upgrading SEP to 12.1 is the client version of SEP 11.06 is compatible and will it work properly with SEP 12.1 .
Ans : Yes it is compatible, SEPM 12.1 can manage SEP 11.0.6 clients, however as earlier said it's good practice/recommended to have both SEPM and SEP clients on same version
Question : How can we do the client up-gradation what are the procedure required . What are the necessary steps needed to do up-gradation
Ans : you will have to consider few factors while doing client upgrade, for eg. network bandwidth, client reboot schedule, method of upgrade.
Question : Can we do the client and server up-gradation which are residing at different location through centralized console
Ans : Yes, but again consider above options
Question : It is mandatory to restart the systems after up-gradation of client to 12.1
Ans : Yes it is mandatory.
Your hardware configuration looks good but disk space can be concern in the future.
You should have more free space on SEPM installed drive and database drive.
4GB free space won't be enough in the future. Increase your disk space before upgrade.
I hope it will help you !!