It is certainly possible to do "apt-get dist-upgrade". I don't think that will necessarily upgrade everything the same way reflashing does, but after the last OS release I compared the package versions I had against those in the release and they all seemed to match the new release anyway. The claimed reason for that release was fixes to the boot code: I would think that won't have been updated by apt-get but I haven't experienced problems booting so I didn't bother reflashing.

But I'd disagree with your assertion that reflashing loses settings: so long as you have a recent backup which you can restore you shouldn't lose any settings or data. You may lose applications if they aren't installable through the package system, but once you reinstall them you should still have any settings. You will also lose any customisations you make to system files, but most people whont have those.