I have a small, personal blog under a different blogger sign in and I switched it over just now and I was very pleased. I am not ready to deal with changing over my much larger main blog, mostly because of my many template customizations and my sheer terror of either Blogger or me goofing something up .
Here's what I have to report:
Save your current template as a text file and print it out so it is in front of you. (Blogger also save a copy of the original, but this way it is in front of you if you need to type in or change anything)
Take note of any special colors you might have used
Think ahead of time about what labels you might want to use
When you change over your template appears unchanged and you can use the label function immediately. If you want to have a list of the labels you are using you will have to change to the new page elements format and chose a new format, which are based on the templates previously available. (No new looks, unfortunately.)
You can then add in all sorts of goodies such as links and your list of labels by using the page elements button. When you are done, go to fonts and colors to customize. My test blog had some sidebar colors that seriously needed to be changed after the conversion but it was a simple fix.
A note, think about the style of your labels before you begin. If you type labels, LABELS, LaBels, lables, or whatever, that's what the actual label will look like on your post, any subsequent post you use it in and on your blog home page if you display your label list.
Adding labels to old posts looks relatively painless as long as you can tell from the title what the labels should be. There are check boxes and drop down menu on the edit post page to enable adding labels to published posts. You can add the same labels or label to multiple posts at the same time or add labels post by post.
There are differences in how past posts and blog archives are displayed, but for me they were minor. I'll continue to play with my "test" and will let you know if I uncover any issues.