John;
What you describe should work however, let me describe how I upgrade; this may not be what everyone else does, but it works for me.
- My "moodledata" folder resides outside of the web directory, the next directory level above the /public_html that you describe. This way, the data that students and teachers add to their moodle courses NEVER gets touched in an upgade. I create a TEMP_moodle folder in the directory where moodle resides.
- I drag and drop all the "old" moodle files to the TEMP_moodle directory (except for the custom themes I have created and some other customized files that I need). In your case, the folder that you currently have set to store your data must not be dragged into this folder
- I then install the "clean" moodle installation in the exact location I want it to appear (Your public_html.).
- Be sure to use the same CONFIG.php in the main directory. That way the paths to your data will be the same.
In your circumstance, I don't believe it was necessary to place the "New" moodle files in the moodle_1 folder, you should place the "old" files there.
This is just my two cents worth.
Marc