As the VIO server is an appliance - the main thing is to make sure the partitions are backed up. The other issues revolve around the kind of maintenance window you have for this. How much time, are all the partitions going down, do you have dual VIO servers, etc..

Again, the main thing is to make sure the partitions are backed up - at least all storage (e.g. logical partitions that are used as hdisk0 aka rootvg by the partitions).

As part of your service agreement I would also try to have an installable image or dvd with VIOS 1.5.0 or 1.5.1 at hand. If all fails you could consider just reinstalling from scratch.

Basically, you can make a backup of your current VIOS environment - assumig 1.2.1 had this command already.

from man backupios:

Examples
       1    To generate a backup to the optical device named /dev/cd1, type:

            backupios -cd /dev/cd1 -cdformat
       2    To generate a system backup to a tape device named /dev/rmt0, type:

            backupios -tape /dev/rmt0

Related Information

       The mount command and the savevgstruct command.

Worst case is that you lose all the information on your local disks and have to restart from scratch. Thus, do you have backups of your partitions so that you could restore them all from scratch?

Regarding the last step: the packages for updating the VIOS are self-containing. All the files are there. However, you will probably need to run the command twice to get the updating done, and a third time to commit all the patches.

To do the updates you will need to run updateios with a -accept argument and as a final step, to commit (ala installp commit) you should run "updateios -commit".