You need an older install to upgrade. And to boot an ISO, you need to mount it as a CD/DVD, VBox should by default try to boot the DVD before the hard drive.
Once booted, the installer, after the license agreement, where it gives choices like simple install/scripted etc, should also give the option of upgrading an existing install. So basically you start out like you were going to do a full install, then choose upgrade in the installer. IIRC, it does it in 3 phases, 1st while running the installer, then a reboot, more updating, another reboot and more upgrading.
As I mentioned previously, good to have a backup just in case. While the upgrade process works pretty well, there's always a possibility that something unexpected might happen and even after a smooth upgrade, you may find your desktop icons need rearranging and things like %TMP% might have changed.
Try installing your previous version in VBox, then try updating it to get a feel.
BTW, what video driver are you using?