u can upgrade package and remove bugs without resinstalling the whole system. so if u already install it, u need not upgrade it all the time.
unlike nt4 to win2k, they change too much. and microsoft do not provide a way to upgrade its system components one by one.
linux distributions are still loose coupled. i mean they are kernel + many many packages, so u can upgrade u kernel only, or upgrade u kde from 2.x to 3.x.
the problem is for many users, they want new packages, and new features. but they do not know gcc, make, config... much. so what they can do is to buy a cd and install it. that is why rh need provide new version distributions with new packages. no everybody know how to remove kde 2 clearly and install kde 3.1.
i use gentoo, i can upgrade my packages easily without reinstall the system. and i know which config files i need modify, i know which cflag i need use. so i need not reinstall.