The upgrade will overwrite anything you did in the Classic template as that is a default template ...

Providing you Upgrade your database, you will not lose products ... but you do want to backup your database incase something goes wrong in the upgrade process ...

We recommend that while Classic does come with Zen Cart v1.3.x ... that you use the base from template_default to build your templates and overrides as this is a better design for your future ...

There are numerous posts on design, templates and overrides to help you out plus a lot of samples in the Downloads as well as help here on the forum ...

The bug fixes, security issues, numerous new and improved features, etc. that v1.3.0.2 will provide will really overwhelm you ... and make it well worth the upgrade ...