Yes, flashing a new image will wipe anything on it previously. You’ll want to do an update of individual packages instead, but I’ve forgotten the exact recipe for doing that in Angstrom since I switched to Ubuntu some time ago.
Before doing anything else I’d recommend doing an image dump of the sdcard or (if you’re using the embedded flash in the BBB) at least making a backup of all the files using “tar”. The last time I tried to update an Angstrom system, it resulted in an unbootable system. That was part of the reason I gave up and switched to another distribution. (But hopefully Angstrom has fixed that problem by now.)
To back up an sd card; plug it into some other linux system and note whether you’re using a usb or mmc interface, in which case the card will appear as /dev/sdX (for some X in a-z), or /dev/mmcblk0. Then do:
dd if=/dev/whatever of=sdcard.img bs=4M
If you completely hose the sdcard contents, you can restore it by using dd again and swapping the of= and if= filenames.