If you upgrade your phone, you will lose the ability to put apps on it and debug directly from Xcode, unless you also download and install the SDK on your Mac with at the corresponding release level. e.g. you need the multi-gigabyte 4.1 SDK/Xcode install dmg to talk to an iOS 4.1 phone.
But you could probably do Ad Hoc installs on an upgraded device using the latest iTunes even with apps built with an old SDK.