You've got to somehow be able to boot the 10.1 upgrade, so you might be able to copy the files out of the disk image onto the firewire HD then select that HD in the startup disk control panel (or the startup disk panel under system prefs in 10.0) and then boot off of that disk and update your 10.0.X copy.
And doing a clean install all depends on what 10.1 CD you have. If you have the full-install image, YES, you can. If you have the 10.1 updater image, then NO you cannot do a full install. AND -- you can actually screw yourself good if you try.
My 10.1 update disk that I got from the Apple store has an option, when installing, to erase and re-format the target disk. The literature included with the CD says specifically NOT to do this, because after it formats the drive, it will NOT find any 10.0.X installation to update!