I have updated and it has wiped my game to date and put me right back to the beginning starting from scratch.
This happened to me as well with the first update. But this time, instead of updating through iTunes, this is what i did, and it did not erase my progress:
1. If you have Wi-Fi at your house, turn it on (unless you get decent 3G coverage). This is so that you'll have access to the internet.
2. Open up Aurora Feint. Either mine and level up, or solve a Magic book puzzle, build a blueprint, do SOMETHING that will progress your character. When that's done, go ahead and exit Aurora Feint. We do this because when you progress in the game, it syncs your account automatically with Aurora Feint's servers, saving your account given that you had access to the internet.
3. Go ahead and open up the AppStore on your phone, and dl + install the Aurora Feint update THROUGH YOUR PHONE. Leave it alone for like 10-15 minutes. When it's completely done installing (no beachball anywhere), turn your phone off.
4. Turn it back on, everything should be as it were, and Aurora Feint will be updated and your progress should not have been erased.
Hope this helps anyone else hesitant to update - do note that while this has worked for me, as well as a couple people i know, your mileage may vary.