This may sound strange but do you have any shortcuts referencing files in the ePO folder structure, for example desktop shortcuts to the log files? I have a vague recollection that this can cause the problem you're seeing...
Please forgive me if you have already gone over this but there are steps that need to be performed before upgrading EPO.
In section 3 of the installation guide it give the steps and processes for upgrading. If you can give the exact error you get that would be helpful to diagnosing the issue.
Thank you both for your replys BUT I have already checked the document mentioned and I have done a search on all profiles and cant see any shortcuts to the epo folder. The exact message is "Setup was unable to backup the existing ePolicy Orchestrator C:\Program Files\McAfee\ePolicy Orchestrator. Please close any application that may be accessing that folder.
I have closed everything, given myself ownership rights and run Processexplorer and killed everything Mcaffee except the installion file, CRAZY!