I have an R5C7 backend installation that I have added or reconfigured SlimServer, DHCP, TFTP, LVM2, ACPI, Samba, MiniMyth.

I am new to Knoppmyth and linux so I'm reluctant to upgrade to the latest Knoppmyth because I'm scared I will loose all my hard work.

Is it only the MythTV configuration that is saved when I upgrade or will I be able to keep most/some of my existing system configuration?

See the R5D1 Upgrade notes and the referenced Backup/Restore hints postings, for these and other details.
http://mysettopbox.tv/phpBB2/viewtopic.php?t=11293
http://mysettopbox.tv/phpBB2/viewtopic.php?t=10117
Also see the pamphlet and other documents that they reference:
ftp://knoppmyth.net/R5/pamphlet.pdf

Just a suggestion but... don't fix it if it aint broke.

Is there something in the R5C7 version that isn't working?

The R5D1 version provides the same version of mythtv itself (.19) as the C7. If C7 works fine, I'd stay with it. But that's just me.

The version of 0.19 fixes in R5D1 is quite a bit more modern than the one in R5C7. Including some issues listed in the upgrade hints, but also a lot of improvements and fixes. It's also the version that Cecil's 0.20 .debs are designed to install on top of.

Will the km release offering the automatic update to .20 require R5D1?

If so, that definitely makes a difference. However, personally I might just build a newer machine with better hardware choices and do a full install.

If it doesn't require R5D1, then it's a matter of risk/reward. If the fixes are worth doing the update, then yes. For someone who is a newbie to linux and obviously nervous about messing with his working system, an update isn't warranted unless he needs or wants the fixes.