You're a little early
, as Fedora Core 7 won't be available for 6-9 months. Assuming you mean FC6, yes, you can update in place.
Some things to keep in mind:
- An update only updates existing software, it does not install new software. However you can add what you want after the upgrade.
- Upgrades can have problems with software installed from third-party repositories, since dependencies for those packages can't be handled properly. The recommendation is to remove third-party rpms and re-install the versions compatible with the new release.