Only if you restore from a backup. If you want to save your contacts, you will need to back them up somewhere else on the computer. Like in Address Book. Look below, the OP wants to set up a new phone, not from a backup.
That is correct, as long as you don't care about an unlock, go ahead and upgrade, and you can use redsn0w and jailbreak the device when the software is updated, and you won't lose any data on your phone.