It happens that the automatic upgrade doesn't work. You will need to do a manual upgrade.
Read this on how manually upgrade your Wordpress installation:
Updating WordPress « WordPress Codex
every time i update my wordpress this error occur which iswhy i'm still using WordPress 2.8.6.
i entered the correct hostname, user and password but it seems not going thru..
anyone experienced this too?Downloading update from http://wordpress.org/wordpress-2.9.2.zip.
Unpacking the update.
Verifying the unpacked files
The update could not be unpacked
Wordpress automatic updates suck!
Do it manually.