As far as i understand it Betas will never have an upgrade feature for the fact that they want you to start fresh. That way they can get a clear picture of what is still causing problems. If you do an upgrade then it has the possibility of being from either the old or new version. That is why they have the beta process like they do. If they allowed upgrades then Vista would have been released already and we would have SP1, SP2, SP3 and so on.
Also the changes that have occured might affect the stability of the OS not allowing it to be upgraded. Such as file system changes, virtual folder changes, video drivers, sound drivers. Everything would have an effect.
As for Beta 2 all lanes are pointed toward the fact that Beta 2 will be public and some sources have said it can be as early as December 7, 2005.