Please refert to this article
it gives the information required for upgrade
http://blogs.msdn.com/crm/archive/2008/05/01/upgrading-to-crm-4-0.aspxor refer to this URL
https://community.dynamics.com/blogs/crmfranklee/comments/10445.aspxYou could also get more detailed information
Microsoft CRM 4.0 Implementation Guide - Installing Doc, Section: Upgrade from Microsoft Dynamics CRM 3.0 Server