My upgrade from 2.0 to 2.0.1 did NOT go smoothly. It got an error at some point, which left my Touch in the firmware update state (iTunes + USB cable image on the touch screen) and wouldn't come out of it until I forced a restore. That did work, but then it took 3 restores from a backup before it finally finished the upgrade. After that, I had no music or video, just my apps and data, so I had to put my music back on.
Just make sure you copy any music you want to keep off into your iTunes library on your computer and you should be covered.