I installed display when it was version 1.4.1, I made a lot of changes to the css and some of the java in the pretty photo plugin. So Im wondering what the best way to upgrade to version 2 would be with out me having to redo everything I changed. Sorry I haven’t gone through the upgrading process much with wordpress.
Yes you need to modify all theme files again (although you can try to use your old css files). Backup your old themes directory via ftp. Afterwards delete it on the server and upload the new (modified) theme files.