My repository looks like this.
v1 - A - B - C ...
where the commit v1 represents the contents of upstream-project-foo-0.9.8.tar.gz and the commits A, B … are my modifications.
The goal is to upgrade my copy of upstream-project and port the commits A, B, C … to it.
How do I get a new version of the upstream-project tarball into my git repository as another branch? Or should I consider making a second git repository?
create a new branch from v1 and extract the new version there.
You can then merge the changes between versions into your main branch where your updates are.
You may also want to create a branch off of C (or whatever your latest version is) to merge the updates and then merge the third branch back into your master when you’re done.