I am not clear whether you are upgrading or doing a new install over your existing installation.
I am assuming you just want to upgrade, and in that case I don't understand why you are burning ISOs instead of using
freebsd-update(8) or using the buildworld process. I suggest you hit the
Handbook.
If you use one of those methods, none of the configuration files for your 3rd party applications will be touched. The FreeBSD directory hierarchy keeps 3rd party configs and system configs separate. For something like K3B, that config would be in your home directory anyways.
Kernel modules built for other kernels can cause kernel panics. For the nVidia driver, you should unload the nVidia kernel module before you upgrade and prevent it from loading until you are done with the upgrade. Rebuild the nVidia driver after your upgrade is complete and then you can reload it.
Finally, if you want a good summary of the changes between 7.0 to 7.1, you might want to look at the
FreeBSD 7.1 Release Notes.