Hi,
I have not tried it yet since I do not have VS 2010, but I believe that it works in the same way as .Net 2.0 -> 3.5. You have just opened the project in Visual Studio, it asked if you want to convert it and
Visual Studio converted the dll files to newer version.
There are two hotfix packages so you do not have to convert them every time you apply the hotfix.
Or, you can just install fresh copy of Kentico
CMS with .Net 4.0 and copy over the solution file and bin folder (there were also some changes in web.config file which you might alter manually).
Best regards,
Juraj Ondrus