Upgrade versions only allow in-place upgrade exactly like a full retail copy would. You can only do an in-place upgrade of Vista, not XP, for like-Editions or lower-to-higher, and both must be same x86/x64 architecture - you cannot in-place upgrade x86 to x64 (this also applies to the Windows Easy Transfer function).
You can do a clean install with either upgrade or retail disc, but how the upgrade version will handle the previous licensing verification is still under speculation, whether you need an activated XP or Vista partition on disk, or just have the original installation disc, or enter the original key, nobody knows for sure.
Edit: There is only one license per copy. And you can customize in the Control Panel / Programs and Features - there's a link on the left "Turn Windows features on or off".