I typically buy a new drive, install the newer OS to that, and set up a vmware instance pointed at the raw disks with the old install on it, so I can boot up the old system at the same time as the new one if necessary. Often I get a newer/faster CPU at the same time, so the old system still works about as well as it ever did even under virtualization (sometimes it even gets faster). I'm looking forward to finding out whether Xen makes this possible in CentOS 5 without VMware.
i think i read that rhel4u5 will have xen in it as well. i can't recall where i saw it. might have been someone getting confused between u5 and rhel5...
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