I downloaded, unzipped and copied over the ionic-v1.0.0.rc5 folder to my workarea appname/www/lib/ionic. After the upgrade, running ionic setup sass gives following error:
[14:09:42] Starting ‘sass’…
[14:09:42] Starting ‘watch’…
[14:09:42] Finished ‘watch’ after 12 ms
stream.js:94
throw er; // Unhandled stream error in pipe.
Error: source string:717: error: file to import not found or unreadable: “www/lib/ionic/scss/ionic”
which comes from appname/scss/ionic.app.scss last line
@import "www/lib/ionic/scss/ionic";
Looks like I missed some step in between, will appreciate help. The downloaded zip does not include an scss folder, nor did the previous version zip!! How does this get generated? Thanks.
–EDIT it was a good opportunity to dig into the ionic serve cycle 
fixed my issue.