1) You won't destroy your phone! It's an easy process, though I totally understand your worries. I was nervous the first time I upgraded the OS on my 8800.
2) Desktop Manager backs up all your contacts and messages (SMS, MMS, email) before installing the update. Afterwards, it will put them all back on your phone like they were never removed.
But, if you're really nervous about it, I'd suggest doing a backup beforehand - just in case. However, it should go just fine, and if it doesn't, that's what BBF is here for!