Shafir.
1 / 2 - If you are upgrading an existing backend component to a new version then it will indeed be an upgrade process.
3 - you should build wherever you wish to. As long as you have NetWeaver and SAP you can set-up wherever and however you choose. That's more a local process point than a Nakisa installation requirement. I've worked on systems that have started in a sand box and in development. I've started several times on a QA NetWeaver server but with a build pointing to DEV and maybe on one occasion all in on QA. What matters is that for the back end components you follow the organisation's processes for moving components between all environments. You don't want to back yourself into a corner by trying to skip ahead or missing any parallel system push-outs.
Regards,
Stephen.