A theme can fail with a WordPress update, but that should not affect anything in the admin area unless it is directly related to the theme.
If you are having admin problem, it could be that the update failed. I gave up using the automated update process due to too many failures. Try using an FTP utility and manually copy all of the files to the WordPress site.
If that does not fix the problem, try switching to another theme, as iowadawg indicated. The current version of TwentyTen would be a good test.
You can have it fast, good or cheap. Pick any two.
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