I am going to extract the latest version of SMF 2 to my hard drive and then upload to the server. By doing so, do I need to upload every file in the "forum" folder to the server or just certain ones (the new ones)? Not sure if I affect anything by just telling it to upload the entire forum folder or not.
if you downloaded the large upgrade package you must upload ALL files in order to have a running forum and preform the upgrade successfully. make sure you do a database backup first.
You can also read here about the upgrade process
http://docs.simplemachines.org/index.php?board=3.0;sort=subject
Or the new wiki pages pertaining to upgrading.
Upgrading (http://wiki.simplemachines.org/smf/Upgrading)