I would just like to know if ALL core files are replaced with a Magento 1.x upgrade via Magento Connect? Or are there certain files that are ignored?
I never edit core files, but it's just something I'd be interested in understanding.
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When upgrading your Magento, you will lose any changes made anywhere in core files, which is just one reason why it's best to avoid touching them. Here's a nice guide that helps explain some alternative options and the reasons behind them: https://www.demacmedia.com/magento-commerce/magento-upgrade-guide/