This version fixes compatibility issues with WordPress MU 2.8.1. Due to major changes in this version of WordPress the updates to BuddyPress are very specific, therefore WordPress MU 2.8.1 is required for BuddyPress 1.0.3 and higher. Please upgrade your version of WordPress MU before upgrading BuddyPress.
There are now complete upgrade instructions, so please follow these step-by-step when upgrading BuddyPress.
Once you have upgraded to the latest, you will need to re-add your BuddyPress widgets. The widgets have been completely rebuilt with the new widget API. This is a one time step only.
As always, please backup before upgrading anything.