There’s no easily visible option to do the “Erase and Install” for the upgrade version of Snow Leopard (the $29 one). There’s a lot of confusion on the net as to how to do it. It’s actually pretty easy, you just have to do it manually.

1. Insert install disk
2. Run installer
3. Click the Utilities button
4. Choose the option to restart
5. When it reboots into the installer, click Utilities > Disk Utility
6. Erase the hard drive the way you would in any other full disk erase (obviously, this will delete all your data and programs, so be sure to account for that)
7. Once done, close Disk Utility and return to the installer
8. Finish the installation normally

This worked for me just fine. I’m now installing my old apps, customizing my settings, and copying over my files.

If this doesn’t work for you, you can still do a clean Leopard install, and then do the normal Snow Leopard upgrade.