I tried many times to update my WordPress version from 2.9 to 3.0.1. But whenever I tried from dashboard, it just got stuck.
The wp-content directory was also in 777 mode. But still I cant get my WordPress updated. To get this done, I put my root directory to chmode 777. And I disabled all plugins. And it just works like a charm. If you are also in same situation, you can try this trick.