You can upgrade using a CD by selecting the "Upgrade" option from sysinstall, but I have never used it. One of the reasons I suggested using freebsd-update or cvsup/buildworld was for saving bandwidth.
As far as K3B goes, the configuration for the application itself is in your home directory. All of the other files for permissions and the like in
/etc are not K3B specific. I would assume "Upgrade via CD" uses
mergemaster(8) to merge your configuration files like all of the other methods of upgrading do. In that case, just take care to look at what mergemaster is actually merging in when it comes to your configuration files. If you don't pay attention, it could revert your configurations to default values. That is why it is a good idea to backup everything before upgrading.