Generations v8.5a will install itself completely separately from any previous version. You install the v8.5a CD, and then copy your .uds family files to the new Program Files/Generations folder. That's it.
It is your choice whether you retain the old v5.2 installation or uninstall it.
It is impossible to open Generations .uds family files directly from a CD or a DVD. You need to copy the .uds family files from the CD/DVD to your hard disk and open them from there.