Upgrading/uninstalling/reinstalling does not remove any Virtual Machines you've created, just like doing the same with about every other application it typically does not remove the "work product" thereof. Like upgrading/uninstalling/reinstalling Microsoft Office it doesn't remove the documents you've created and you can open and use them in the newer version. Obviously with VMware Fusion there are some major virtual hardware differences between v2.x and v5.x so to get the most out of the upgrade you should be prompted to upgrade the virtual hardware when running the older version Virtual Machine in the newer version VMware Fusion and you should allow it.
That said, before doing anything make sure you have proper* backups of your Virtual Machines you upgrade and Time Machine is not considered a proper backup for Virtual Machine.
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* It is a known fact that Time Machine is not 100% reliable backing up/restoring Virtual Machines under all circumstances/conditions. Also backing up Virtual Machines via Time Machine is disk/time intensive and wastes a tremendous amount of space for something that may be corrupt and worthless come time to restore it. At a minimum I would exclude Virtual Machines from Time Machine and with the Virtual Machines shutdown, not suspended, and VMware Fusion closed then manually copy the Virtual Machines Package(s) to an alternate location, preferably on to a different physical hard disk. Then keep the User Data that is stored within the Virtual Machine backed up off of the Virtual Machine on a regular basis so as to always have a current User Data Backup. If you have to restore a properly backed up Virtual Machine that is not as current at least you'll have a working Virtual Machine and current User Data to go forward with when you find out your Time Machine Backup of the Virtual Machine fails.
Also have a look at: Best Practices for virtual machine backup (programs and data) in VMware Fusion (1013628)