There are 3 options when you install an upgrade like Panther.
The one I would choose is "Archive & Install." This puts your old Jaguar System folder aside (you can delete it later) and installs a fresh Panther one, but it automatically transfers over your user accounts and most of your preferences. The rest of your hard drive is not affected.
There are 2 other options. One is "Clean Install," where it completely removes your old system and installs a new one, but it keeps all your stuff, like programs you've installed, etc.
The last option is "Erase & Install" which completely erases your hard drive (or partition) that you've chosen to install the system on, and then installs the new system on it.
So pretty much unless you do an Erase & Install, don't worry about your programs. I haven't had any trouble with Archive & Install. There isn't any clutter like you imply that someone gets with Windows 2k to XP.