Either way is fine. All_PACKAGES simply contains more than the single file… therefore the menu is slightly different because there are more things installed.
Make a backup using the /system backup command or the webfig equivalent and an export of the whole configuration.
Download both to my management workstation.
Upload the desired packages. You can do this either using the individual packages from the all_packages or routeros and any supplemental packages you want. For me that is routeros-mipsbe-.npk and ntp--mipsbe.npk. The routeros meta-package contains a whole list of core packages as described on the wiki here: http://wiki.mikrotik.com/wiki/Manual:System/Packages#RouterOS_packages “(includes system, hotspot, wireless, ppp, security, mpls, advanced-tools, dhcp, routerboard, ipv6, routing)”
Reboot the router from webfig or the command line.
Put your hands under your butt and sit on them quietly while the router reboots and upgrades itself. Do not panic or rush or mess with it until the router tells you it’s ready. This involves flashing all the lights at least a couple times and finally returning to what looks like normal operation for at least 30 seconds. Figure maybe 4-5 minutes total. Be patient.
Log back in and check that everything looks OK, then do the firmware upgrade, if any, under /system routerboard.
Reboot again. This time it will be quicker to resume normal operations, but again be patient.
BTW - I usually do another export at this point, download it, and compare it to the original. This will show you any new configuration options or changes that need attention.