From personal experience, you wouldn’t want to upgrade your production server’s PHP version directly to 5.3. PHP 5.3 included several important changes, and if it wasn’t because that UTF-8 is still not properly supported, it could have been called PHP 6.
Testing locally or on a test server is something that you must do to see if your scripts/apps could run properly with PHP 5.3. For me, the fastest way to do so was to download XAMPP 1.7.2, and test my scripts in htdocs. XAMPP 1.7.2 comes with PHP 5.3 and can get your whole LAMP or WAMP environment setup properly (and easily) in no time. You might be surprised to find that something that has been running perfectly fine in PHP 5.x.x might not be in PHP 5.3
As always, comments welcomed.