I upgraded my 30gb photo album to iphoto '11 yesterday w/o any issues at all
In fact, I was going to make another comment asking about how can bug like this happen. I am sure that Apple QA team tested the upgrade functionality and they didn't find it. I am really finding it hard to imagine what kind of corner case the code ran into, which caused deletion of precious data.
EDIT: Wow. This is interesting. So one person could upgrade w/o issues and that's why my comment which points out that there are other VALID, repeatable instances where upgrade did not go smooth gets downvotes. That's funny.