The recommended way to upgrade, unfortunately, is to export your bookmarks et al, unpack the new TBB into a new directory, and import your bookmarks there.
Most of the time it is safe to just unpack the new TBB over the old one, but every once in a while it will break things in a confusing way (for example, the last breakage changed the SocksPort and since Firefox caches the old proxy parameters, your new TBB would seem broken the first time you ran it).
So you're doing it correctly.
As Steven points out, this approach also discards your old Tor datadirectory, including discarding your entry guards. If you upgrade to a new TBB every 6 weeks (the schedule that Mozilla puts out a new Firefox update), you will thus end up rotating your entry guards more often than is safe. So if you want, you should copy over your Data/Tor/ directory, or at least the Data/Tor/state file.
In the not-so-distant future, we're hoping to have the Firefox update mechanism working in TBB 3.x:
so hopefully things will get smoother over time (including letting you automatically keep your current Tor state file).