You run the upgrade.php script to update your vb3 database to vb4.
It sounds like what you are doing is setting up a test site to test your upgrade. So, you download the database, upload the vb4 files (to localhost) and then run the upgrade.php script to upgrade the database. Then go install your mods, create a style, etc. Then, when you are ready, you close your live site, upload all the vb4 files there, run the upgrade script and then upload/import all the same modifications and the style you created.
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