Hello:

We have 2 Fujitsu Siemens Primergy TX200 S4:
- 2 Intel XEON QuadCore L5420 (8 CPU)
- 16 GB of RAM
- 300 GB local storage (SATA)
- 3 NICS
- 16 virtual machines

both running ESXi 3.5.0 build 213 532 from a USB stick.

My question, and big question is whether it would be possible to upgrade from version 3.5 to 4.0 without loss of configurations, virtual machines, etc.

I have no special configuration on the image of usb flash drive, just do not want to install on your hard disk.

You should be fine to upgrade but I would have a backup of the ESXi config before you proceed. If you can take the host down you could also clone the USB disk with something like dd and then you'll have a good and easy way to recover the 3.5 install should there be a problem with the upgrade.