1. Upgrading is generally pretty straight forward. Backup your site, backup your database. Copy a few lines from the original web.config file to the new web.config file. Copy the new package over the old site. Access the site, DNN does the rest. Though for a large site I would recommend doing all that in a test environment first.

2. Currently, if modules and skins are developed properly, modules developed for DNN 3 shoudl run on 4.8.2, though because of the extracted nature of developers all over the world, no everyone will follow standards for development, not all modules/skins will work in all versions of DNN. Most of the modules we release at www.engagemodules.com are compiled against 4.5.1, and run on every version since

3. Not necessarily a staging environment, more of a test environment. Though, in production you can setup a "staging" site that you upgrade, if all goes well turn off the production site and make the staging site production.

Hey Steve,

Upgrading:  very easy, especially if done often.  The more versions skipped between versions, the more chances for issues.  That said, I've not had many issues on upgrading sites since DNN 3.x

2:  I believe the core team plans well to keep updated DNN versions from breaking older 3rd party code and skins.  Older code/skins usually just work, but occassionaly there maybe issues that need to be fixed.

3:  I don't stage my site, but before I update modules there - they have been tested on 4 or 5 other DNN installations, and I've done a site and SQL backup.
For some of my clients I'll do a full staging server.  My tools for either method don't change much beyond FTP and WinRar.