After a few hours of trying to find a solution to the “Installation failed” error message, when using the automatic upgrade feature in WordPress, I found this thread.
There are a number of variations on this error message, some more descriptive than others. This solution will however only work when you just get “Installation failed” as the error – nothing more, nothing less. In this case it was tested on a WordPress 2.8 to WordPress 2.8.4 upgrade with WordPress installed in the website’s root folder.
The FTP account, used for the automatic upgrades, did in this case have the WordPress installation folder as it’s root folder. By moving the FTP root up one level, above the WordPress installation folder. Example:
FTP root folder – before:
FTP root folder – after:
Your web host might be able to help you out if you can’t configure this using your control panel.