I finally got the upgrade FC1->FC2 to work, and was moving onto FC2->FC3 and ran into this problem:

[root@localhost root]# yum list updates
Traceback (most recent call last):
File "/usr/bin/yum", line 6, in ?
import yummain
File "/usr/share/yum-cli/yummain.py", line 23, in ?
import yum
ImportError: No module named yum
[root@localhost root]#

I'm following the instructions at http://www.brandonhutchinson.com/Upg..._with_yum.html

[root@localhost root]# rpm -Uvh fedora-release-3-8.i386.rpm yum-2.1.11-3.noarch.rpm

Preparing... ########################################### [100%]
file /etc/sysconfig/rhn/sources from install of fedora-release-3-8 conflicts with file from package up2date-4.1.21-3
[root@localhost root]#
[root@localhost root]# rpm -Uvh --force fedora-release-3-8.i386.rpm yum-2.1.11-3.noarch.rpm
Preparing... ########################################### [100%]
1:yum warning: /etc/yum.conf created as /etc/yum.conf.rpmnew
########################################### [ 50%]
2:fedora-release ########################################### [100%]
[root@localhost root]#

Anyway, I installed the new RPMs of fedora-release-3-8.i386.rpm and yum-2.1.11-3.noarch.rpm, and as that site says may happen, I had to force the install due to an up2date conflict. Any ideas?

As the page you linked to says, this isn't guaranteed to work as well as the official upgrade option (which isn't guaranteed either).

If you can get a working version of yum then it can probably sort things out by downloading and installing whatever is required. The man page for yum advises that you are better using "yum upgrade" rather than "yum update" for system upgrades.

No. It only seemed to work. The result was not a good upgrade. Look at the error you got.
up2date-4.1.21-3 is not an FC2 package. FC2 includes up2date-4.3.19-1.

With --force you only make it worse.