Migration Assistant was a Nightmare for me
I tried migration assistant back in the days of 10.4-10.5 and then now from 10.5-10.7 (from an iMac G5 to my current i7 macbook pro) and all I've had were problems.
For me, the best solution is to keep all your files -- documents, music, photos etc. in one place (which would be in your home directory and nowhere else on the computer) and use Carbon Copy cloner to back this up to an external drive. Easier said than done for the average person. But this is precisely what I did before I wiped the computer clean to reinstall Mountain Lion from an absolutely-clean start.
Applications are best to have re-installed from their installer files. If you're savvy enough, you might know where these apps keep their settings data (for example, Pages' templates, MS Words templates, and saved games for your games...). If you don't know where these things are kept though... maybe ask an Apple genius (are they free)? Then again, if that's the case... the 'genius' can do it all for you.
There is an 'easy' option with Carbon Copy cloner... which really takes your entire computer and clones it. However, when transitioning to a new OS, I would imagine there might be plenty files copied over that well... just don't need to be.