I have spent almost a day and a half for this upgrade.When most of the folks have done it in 5 minutes. I am just trying to put it in here,somethings which maynot be clear for the first time upgraders :-) (who are not familiar with it, like me).
Am using the standard upgrade.txt,explaining little more ,what would have helped me.
1. Backup your database and Drupal directory - especially your "sites"
directory which contains your configuration file and added modules and
themes, any contributed or custom modules in your "modules" directory,
and your "files" directory which contains uploaded files. If other files
have modifications, such as .htaccess or robots.txt, those should be
backed up as well.
pan: This is very important,first backup database and files.One thing which was confusing for me,
was that the,modules and themes directory was in the drupal installation directory,
and not the sites/all/themes directory and sites/all/modules directory
(where we should install all the contrib modeules and themes as best practise).
Not to worry,
(a) Disable the custom,contrib modules.Switch over to core themes (like garland ).
(b) we can create directories(themes and modules) inside sites/all .
(c) Then copy the respective contrib themes and modules into these directories.