Question: My web project (to be launched in a few months) is currently using CakePHP 1.2.5 / PHP 5.1.6 / MySQL 5.0.77.

From a performance point of view, is it a good idea to upgrade to 1.3?

Will it make it easier to later upgrade to the (PHP5-only) CakePHP 2?

Answer: 
I'd say it depends on when you expect to get your site out the door. 1.3 is currently in alpha status and probably won't be officially stable for a while. While the changes being made between 1.2 and 1.3 shouldn't have a huge impact on the overall stability, the new features being put in might still be buggy. The question is, is there anything in 1.3 that you absolutely need *now*?

If you want to release your site soon on an unstable version of 1.3, you need to make sure through a lot of testing that the parts you're using are performing as expected. If your project will evolve over time together with 1.3, let's say over the next 6 months or so, and you continuously keep updating, you'll probably be in better shape. For example, I developed a project on the 1.2 beta and there were a few bugs in `Set`, which tripped me up, but got ironed out 'till the final release.

For a long-term project, I'd prefer the 1.3 branch, while for a near-future release I'd stick with 1.2.5 for now. You can keep an eye on the [Migration Guide](http://code.cakephp.org/wiki/1.3/migration-guide) to avoid API calls that will be deprecated in 1.3, to allow for an easier later upgrade.
I think an upgrade is always a better opition IF you have time to do it. Im not into CataPHP but, i would do any upgraded if i have enough time before the release.