Check out the posting on the Windows Virtualization Team blog here for more details.

As usual its a one way upgrade process.  Once you go forward there is no coming back! :)

Hyper-V RC0 to RC1 Upgrade Considerations
*Saved-state files are not supported between RC0 and RC1 releases of Hyper-V.  All virtual machine saved states should be discarded before upgrading to RC1, or prior to resuming virtual machines after upgrading to Hyper-V RC1. 

*Online snapshots contain virtual machine save-states and thus online snapshots taken with Hyper-V RC0 are not supported after updating to Hyper-V to RC1.  Either apply any online snapshots and shut down the VM or discard the virtual machine save state associated with the snapshot before or after the update to Hyper-V RC1.

*System Center Virtual Machine Manager 2008 Beta does not support Hyper-V RC1.

*New Integration Components (ICs) must be installed for your supported guest operating systems.  Integration Components are specific to the build of Hyper-V.  RC1 Integration Components for all supported Windows Operating Systems are provided using the ‘Action’ -> ‘Insert Integration Services Setup Disk’ action.

RC1 Integration Components for all supported Windows Operating Systems are now part of the IC Setup Disk.  This now includes Windows Server 2008!  Simply install the Hyper-V RC1 Integration Components for Windows Server 2008 the same way you do all other Windows ICs (‘Action’ -> ‘Insert Integration Services Setup Disk’). 
Note You need to close the found new hardware wizard before setup will begin on all Windows Operating Systems.


Improvements Over Hyper-V RC0
In addition to bug fixes and stability improvements we also made some additional changes largely based on feedback from customers, I might have missed a few I’ll add to this list if so…
   *Integration Components For Windows Server 2008 guest’s included in Integration Services Setup Disk
   *New Graphics for Hyper-V Manager and Virtual Machine Connection – including a “Now” icon in the snapshot pane
   *IPv4 Address Migration - when creating a new Virtual Network bound to an adapter with a static IPv4 address the IPv4 settings are migrated to the new virtual adapter

I'm just about to update my own Hyper-V installation so fingers crossed.