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Replying to:
a_p_
Leadership
Leadership

Welcome to the Community,

please don't mind me if I don't answer each question separately. Maybe one or the other question may not be relevant anymore for you after reading my response.

In order to use Update Manager, you need to purchase vCenter Server as well as CPU licenses for all your hosts. vCenter Server/Update Manager cannot manage the free Hypervisor edition.

Unless the hosts have previously been upgraded from version 3 you can simply upgrade them interactively using the ESXi 5.0 installation CD. Just make sure the hardware is supported before upgrading, because there's no way back except for a reinstallation. Although the upgrade to ESXi offers an upgrade with preserving the VMFS datastore, I recommend you have an up-to-date backup in place!

Once the hosts are updated, you can go ahead and update VMware Tools and the virtual hardware version for the guests as well as the VMFS version for the datastore(s).

André