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i suggest you to read Best Practices for Upgrading to Oracle Database 11g Release 2
Oracle Database 11g Upgrade page
Oracle database upgrade guide 11g Release 2
Welcome to the forum.
1) Do i need to run dbupgdiag.sql script before starting upgrade?
2) Is it mandatory to run utlu112i.sql script?
Better you should use this it will give you the all the diag info. rather you collect manually using different type of Query like timezone info,audit,archive etc..
3) When should i use DBUA method and when should i use manual method?
Yes, this run give you the information about the Parameters need to update,Obsolete/Deprecated Parameters,DB Components and and its Status etc
you can use any method for upgrade DBUA or Manual. DBUA guides you through the whole upgrade process, including all the steps in the manual upgrade process. if possible use DBUA
Good stuff Rob ! May I point out two improvements ?
1. "DBCA vs Manual upgrade" - I believe you meant to say "DBUA" instead of "DBCA". DBUA is the Upgrade Assistant, while DBCA is the tool used to create databases. DBUA is recommended by Oracle and it has performed flawlessly in the past for me - manual upgrades are prone to human errors.
2. Pre-upgrade utility script (utlu1121.sql) - You should always run the latest version of this script available via MOS Doc 884522.1