also I should flash the phone before I do this right?
It's a version of the RUU- the file Verizon would use to upgrade you manually if you were to go into the store. Since you're rooted, going into a store with your phone isn't an option so you just apply it yourself.
Okay, next step is to reroot- use this tutorial: http://www.droidforums.net/forum/dro...ed-3-22-a.html
And you should be good to flash ROMs, kernals, whatever you want.
It did a factory reset. Your contacts should sync back up from gmail in a minute. My bad that I forgot to mention that you'd lose text messages, but everything else including downloaded apps should still be there.