If you want the quick fix (that worked for me) scroll to the bottom.
I noticed last night at work that 2.7.1 was available to upgrade. So I clicked on the link to upgrade it and it never proceeded past the downloading wordpress-2.7.1.zip. I figured it might be a problem because of the severe web-browsing restrictions my work has or the possibility of me running IE. I figured I would just do it when I got home. I did think this was kinda weird because I was able to update one of my plugins without a problem.
So I got home and the link still wouldn’t work. I then ssh’ed into my server (hosted with 1&1) and found that multiple copies of the wordpress-271.zip were saved in my wp-contents folder (additional numbers were added before the extension) all at 0 bytes. So my next step was to google the problem. Unfortunately with this being a new release, not much was indexed at that point. I then went onto wordpress’s support forum and found that some people were having the same issue, but no one had posted a response. In one of the threads that I looked at (which ended up being unrelated to my issue) one of the posters had asked if the topic starters host was listed in the Core Update Host Compatibility list that wordpress had put out. I had never even heard of this list, so I figured I would look through it. It showed 1&1 under the “Works with caveats” section. It mentioned that the upgrade fails with PHP4, but works properly in PHP5. I thought I was already using PHP5, but I figured lets give it a shot. The instructions are very simple.
Go to the root of your wordpress installation and edit the .htaccess file (you might have to FTP in and copy the file to your machine and make the changes then upload it back). Add AddType x-mapp-php5 .php to the end of the file (you can put it above the # END WordPress comment if you like, but it won’t matter either way).
Maybe this will make it so I can install plugins through the dashboard (they would always fail before), but I will look into this later.
EDIT: I just checked and I am now able to install plugins through the dashboard.
EDIT2: As others have mentioned in the comments, the Wordpress Automatic Upgrade plugin is incompatible with Wordpress 2.7+. All the functionality (that I used at least) has been integrated directly into Wordpress. As such, I had already disabled mine, but if you have not disabled it, you will run into issues with upgrading. Your best option is to Deactivate the plugin. You can then ftp/ssh in and delete the directory (not necessary, but I see no reason to keep the plugin). After that, you should be able to upgrade without a problem.
UPDATE (20 FEB 2009): The author of the Worpress Automatic Upgrade plugin has released a fix for the incompatibilities with 2.7.1. I am not sure if the plugin has any benefit over the built-in upgrade feature, but the fix should at least fix issues with the upgrade process. More details here.
Also for those of you who can’t find your .htaccess file. Under most webservers, a period (.) at the beginning of a file makes the file hidden, so you need to be able to view hidden files. If it still doesn’t show up, it may not exist. If not you can just create it with your favorite text editor (do not use a file extension), and add the information and upload it to your server.