Think of a 10.7.3 combo update as a single image containing all the updates from 10.7.1 through 10.7.3. It has the advantage of updating all the files from the previous and current update. This means that this could resolve a situation where there is a corrupted file. The disadvantage to the combo update is that it is much larger and can take longer to manually download.
The 10.7.3 delta update through software update only contains the files that need to be updated for 10.7.3. It is assumed that you have already applied the updates for 10.7.1 and 10.7.2. The advantage of the delta update is it is smaller in size and it automatically downloads and installs itself.
I have always used the combo update as I feel it is the safer way to do the update. In either case, make sure you do a permissions repair before and after the update, disconnect any connected external hard drives and do a time machine backup before starting the update. You may also want to clone your hard drive and apply the update to the clone if you are unsure about the update.
I had no issue with the 10.7.3 update on my 3 Macs. In fact, it resolved two issues that I was having. So far I have not seen any new issues introduced by the 10.7.3 update.
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Boot to your restore partition and do an archive and install. You won't loose any data doing the archive and install.