PerS – it’s possible to upgrade: just copy the files from the archive over your install. You might want to compare the htaccess.dist and .htaccess files as they were updated slightly.
Oh, and run main/wp-admin/upgrade.php in case there were any db upgrades!

Joshua: There’s no automatic way to create new blogs yet, but if you really want to, here’s how:
1. Say your new blog will be called “test”, create a directory in wp-inst/wp-blogs/ called test. Fill that directory with the follow directories: templates, template_c, smartycache. All should be writeable by the webserver. Also copy the wp-config.php from ../main/ and customize to your needs (ie. the database table prefix should be changed to “wp_test_”)
2. Create a symlink to that “test” directory in the “blogs” directory that’s in the same directory as wp-inst. (I need to remove this requirement real soon!)
3. Open up http://yourhost/path/test/wp-admin/install.php to configure and setup the database.
4. You’ll probably have to compare the “options” tables of the new blog and your “main” blog as some entries there will have to be updated.