Upgrade to SEP11 or stay with 10.1.6.6000?

I agree to the fact that we had network issues with earlier versions.
NTP is the  component which causes network issues.
Do not install it if you are not  comfortable with.
can be installed any time with new package creation.
MR4 MP4 is running great....
You may go ahead with the migration, ( personal opinion)

I will recommned you to go with MR4MP2 as it is very stable and all newtork issues have been taken care of in this release. I understand your concern that the last still had some issues, even we expreinced the same. But with SEP MR4MP2 everything id great. It has been the most stable of all the releasee of SEP

Even SEP MR4MP2  can be installed on the W7

Also enclosing the release notes for SEP MR4MP2 ( read the issues that have ben releases in MR4, MR4MP1 and MR4MP2)

Release notes for Symantec Endpoint Protection 11.0.x and Symantec Network Access Control 11.0.x

please follow the best practise before installing SEP in the network:

Microsoft Small Business Server 2003 Best Practices White Paper
http://www.symantec.com/business/support/endpointsecurity/SEP_SBS_BestPractices_v3.0.pdf

Best Practices for Symantec Endpoint Protection on Citrix and Terminal Servers
http://service1.symantec.com/SUPPORT/ent-security.nsf/docid/2008112414453348

Best Practices for client configurations when installed on domain controllers and for computers that are running Windows Server 2008, Windows Server 2003, Windows 2000, Windows XP, or Windows Vista

Only the antivirus and antispyware components should be installed. Do not install Network Threat Protection and/or Proactive Threat Protection.
Additional information on what files and folders to exclude from scanning in a Microsoft Windows environment can be found at:
http://support.microsoft.com/kb/822158

For our backend, I am still migrating from varying levels of SAV to SEP and I have to say that SEP really hasnt given us many issues at all. Much more stable and it doesnt hammer the box like some versions of SAV did. Do have a test bed setup? 

My recomendation is go for SEP. It's firewall works great

Seeing as the general recommendation is to go for it can a fresh install of SEP11 co-exist with the existing 10.1 system center? 

I did have a small test bed setup and an intial small deployment first time round but quite frankly none of the issues showed up until it hit live servers so I see little point in trying another.

Are you talking about having the system center manage the SEP clients? If so, then no it can not manage SEP clients. You can run them in parallel though.

In parallel on the same server is the plan, so that decommisioning of 10.1 can be done at my own pace. 

yes you can but i won't recomend it.

two database, two websites will make confusioin/conflict

I agreed with Bijay.swain You will might  facing or encountered a problem if you install it on the same server, if you are decommisioning the previous server why it should be place on that server hence you should build other server that meet the system requirement of SEPM and I would say that you would nothing to worry about upgrading  to SEP because SEP is doing right now I believe they are continuing to develop the SEPM for the client satisfaction.