I am assuming if I order a new package it will be V3 and I was wondering what the best way to upgrade from V2 would be.  I want to put the new version on the same server and create a seamless changeover.

Is a good method to register the new version as the same sub-domain name or should it have a different sub-domain name as the existing server?

Best place to start would be here: http://www.centova.com/doc/cast/installation_manual/10_upgrading/02_upgrading_from_version_2

And read up on the upgrading from v2 to v3 process.

Since v3 has a different directory then v2 has, It wont have any problems or "cross" each other.

If you are using a "sub-domain" It should be just fine to use the same one.  Basically what you are doing is upgrading, not so much overwriting any files.   Just make sure you have the database and such set up before attempting the upgrade process first.