I have no plans to erase the world and start a new map. Everything should continue as usual, there will of course be a period after the update is released where the server will still be running 1.2.5, anyone wishing to continue playing on Zedwork will need to hold back on updating until bukkit releases a stable build, and all of our essential plugins are stable.
The world generation will change (especially due to the introduction of emeralds), which will need to be addressed; players will want to mine for emeralds, but they will only be available in newly generated chunks. There are a few options, still weighing them up to see which would be best. Though if anyone has any suggestions, please do share