I think it's up to your discretion.
I feel that if it's something super iconic and whose appearance has changed dramatically, I will upload under a new file name and move the old one to the gallery (see Carter Hydro Dam). Otherwise, I don't see a problem with updating images, and that's what I usually do. I figure if someone has some sort of emotional connection(?) with an old version, they can find it in the "file history" section and reupload it as a new file name. George disagrees and thinks we should always make a new image file.
So really it's up to you.