Primo: yes you can continue a dld from the point it left off. All you have to do (if the dld is no more visible in the dlds window) is click the Library tab and go to the Incompletes folder, locate the file you were dlding and click resume.
Secundo: Updating LW keeps any preferences you had before the update, including what Incomplete files you had and, more importantly, which dlds where active before the update.

If you decide to update your LW, you might also wanna check if you have the latest java and stuff by running a Software Update.

__________________
iMac G4 OSX 10.3.9
RAM 256MB
LW 4.10.5 Basic
ADSL anything from 3 to 8Mbps/around 1024kbps

"Raise your can of Beer on high
And seal your fate forever
Our best years have passed us by
The Golden Age Of Leather"
-Blue Öyster Cult-