HDMI upgrade from 1.2 to 1.3?

Yes, you can "upgrade" just like you can "upgrade" your space heater from 110V to 120V. I e, mainly, do nothing. Any 1.2 device will "work" when plugged into a 1.3 source, and will expose all the features that it already did under 1.2.

1.3 allows you to express a lot of new features (including more than 8 bits per component pixels), which allow quality to be pushed higher. However, just adding the 1.3 protocol isn't going to make your display circuitry suddenly display more data. To take advantage of all the new features in 1.3, you have to have equipment capable of producing the new data (say, 30 bpp video), and then equipment capable of presenting that data (say, 30 bpp displays). Which means, pretty much, buying new stuff.

Shopping by the HDMI revision number (i.e. 1.3) can be confusing because it does not require any of the new features made available by the HDMI 1.3 spec to be implemented. When looking for a CE device, please make sure that you shop by specific feature, not by the HDMI rev number. If someone offers to upgrade your TV, ask them what specific features you will be getting.