Oh, right -- I forgot about importing the old user data.
I don't know enough about Drupal in particular to answer properly... but I'm guessing they have a script that will upgrade your old production DB to work properly with the newer version. Check the upgrade instructions before you decide how to proceed.
If you aren't comfortable mucking around in the database (and figuring out which tables you'll need to backup/alter/etc. for a manual merge) the safest approach might be to start out your version2 with a copy (export prod DB, import to empty version2 DB) of the production database -- then run the Drupal upgrade script, and document the configuration changes you make after that (since those will likely also be stored in the database). When you're done testing and are happy with your setup walk-through, the go-live process would be to stop production, and recreate the version2 setup, running the same steps (with the databse import and upgrade, and config). It's a little more work than my previous suggestion, but you still get to practice the conversion, test the new version, and easily revert back to the old version if things get ugly.
Drupal might even offer a method for exporting/importing just the user data, which would make this all easier -- ask on their forums about it.