This is probably a trivial and dumb question, but here goes: What's the best way for me to upgrade from Mandrake 8.0 to 8.1? Should I do a clean format and partition? Can I run the installation from my windows partition (i.e I don't have a CD-burner)?
Best way is a clean format, assuming you don't mind re-setting-up the system settings that got wiped, eg ISP etc. You can (obviously) copy your home directory to your windows partition to save your personal files.
From the user manual/install guide:
"hd.img: use this image in the case where you were not able to perform the install from a CD-ROM. You just need to copy the content of the CD onto the hard drive (either on a FAT ext2fs or reiserfs partition), and boot with the floppy containing that image."
So yeah, you can install using files on your windows partition, but you need to mount the iso images under windows, copy the files out, and make a floppy boot disk first.