Hi,
You can upgrade vCenter server 4.1Update03 to 5.1Update01a, and it retain MSSQL2005 express Embedded DB and data in it. I found vCenter server upgrade without any problem. I believe product Interoperability matrix of VMware tracks only Remote/Custom database not Embedded Database part of vCenter server installation.
If its not a supported database, vCenter server upgrade would have failed to upgrade with incompatible database or given warning.
During upgrade to vCenter server 5.1Update01a, it would ask you to install Single Sign On and Inventory service.
-Nithin