The answer is YES IMO.
I went into Disk Utility - Erased it, formatted it... so there was nothing on it. I then installed SL onto the completely empty drive. There is NO option to erase install / or archive install. The way Apple have designed this disk is so that the only option is to 'install' [which is in effect and archive and install]. I wiped the drive completely prior to doing it.
So....... All done!
You CAN do a fresh clean install with the update disk.
The MBP is very, very quick now [it was quick before!]. Boot up time has decreased by around 5-10 seconds.
This is a before and after disk size.
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I did a little video 'how to' that I will post when I get a chance.
Cheers.
Have to say thanks! Been trying to find this info out for a long time!! Won't be getting my SL disc for some time due to Apple cheaping out on postage, but its really nice to know that it's at least a decent disc.