I would like to know this also. Does this back up ALL settings and what about apps that you've downloaded?

 

I've kinda been wondering how this works as well.

 

I just backed up contacts, photos, and took note of downloaded files........I've only had the phone for a couple weeks, not a ton on there.

After the manual update (didn't notice much difference?) I just reapplied all the settings I had before and reinstalled the applications. The applications that I had purchased were recognized as "purchased" and reinstalled no problem.

The manual update takes about 10 minutes as advertised, but it took me another 45 minutes of goofing around to put the phone back how I had it setup before........I didn't mind though, I enjoy messing with the settings

 

You can back up contacts and calendar using gmail or HTC sync. I found an app "app manager" that backs up apps to sd card. Other than that, the manual update completely resets your phone to factory. So you will need to redo ALL settings and screen set ups.