Technically you can, and I upgraded v3.0 LE and still have that installed. I don't belive th license aggreement says you can't eigther. Boy those SoFo guys are nice, aren't they?
Legally, the "upgrade" is cheaper because it is a "replacement" for your current Vegas 3. SOFO allows both to remain on the same machine. However, you shouldn't run Vegas 3 on a separate machine AT THE SAME TIME AS Vegas 4 is running on the other machine as they are both, technically, the same license. To take it a step further, if you are not running them at the same time, you can legally have Vegas 4 installed on BOTH machines.