I am upgrade a network server version, or activating a new version of a product licence. Do I need to have all licences returned/checked in to the server before doing this?

No you do not, provided you are activating a sufficient number of license seats that are currently in use, then you will be overwrite/upgrade and existing license without affecting the borrowed/checked out license states.

Installing a new version of the license server software will not effect current users using a license from it..