In theory, the data will convert automatically. In early versions of v5.5, there was a problem and as a workaround, you had to convert first to 5.0 and then to 5.5 or else use a fix provided by Microsoft. My recent experience suggests that problemhas been fixed.
Two references I can suggest:
Microsoft has a White Paper on Exchange Upgrades from 4.0 to 5.5 - it can be found at http://support.microsoft.com/support/exchange/content/whitepapers/upgradev27a.doc
Also, article #Q179258 on TechNet makes good reading before you start.
Your client is going to be very happy after all this is done - Exchange v5.5 is a HUGE improvement over v4.0 to say nothing of moving off NT3.51.
Other information can be found on TechNet (http://www.microsoft.com/technet) by searching on Exchange Server and "upgrade".
regards!
paul