Erasing IPhone 4 and getting new IPhone

My daughter is going to sell her IPhone 4 and get an IPhone 4s and I have several questions. First, her 4 was updated to IOS 6 - if she erases everything on the 4, will she have to reinstall 6 (we wanted to sell it with the latest IOS version on it)? Second, how does she keep all of her music, apps, videos, etc if she erases her 4? Third, does she have to take the SIM card out when she erases? Fourth, should she erase the 4 before she gets the 4s, or after? I don't want her to lose everything she purchased and put on her 4 - I want it to be able to go on her 4s - but I also don't want anything she had on her 4 to go with it to the buyer. If anyone can clarify these questions, I would really appreciate it. Thanks!