Following the upgrade instructions that come in the tarball I had no problems upgrading.
A few remarks:
Installing all the extra modules under sites/all/modules makes life a lot easier.
In addition to moving the module, of course, you need to copy the drupal/webauth and drupal/webauth_logs directory into your new install.
Don't forget to copy the .htaccess under drupal as well as drupal/files
In order to preserve Marcos's hack for clean URLs with virtual host proxy I needed to copy include/bootstrap.inc to the new install.
John Bickar reports some issues on the drupal mailing list: "It appears that somehow vocabularies that were associated with a couple of custom node types (biblio, weblink) that were provided by contributed modules lost that association in the upgrade.
I just restored the vocabulary_node_types database table from my pre-5.3 database backup and it appears to have fixed it."