Thanks Sue, that did the trick!
I had to jump through a lot of hoops to get the upgrade to work for me - working my way through several posts - so I will recap what I had to do to accomplish a successful upgrade on a Windows Server 2008 using IIS7. I have admin access to the server so I was able to adjust the PHP max_execution_time from point 3 below myself.
1. I recommend duplicating your site (I use dev.websitedomain.xxx) and also duplicate your database to a new name. This will prevent your live site from being down due to complications during the upgrade. Even if the upgrade goes perfect it will still take you time to install and update the add-ons.
2. Make sure you have a good backup copy of the 1.x database. (there is a good chance you may have to restore it)
3. Check the PHP max_execution_time on your server. By default it is often set to 30 (30 seconds) which on my server was not long enough and caused the update to time out in the middle. You can find the setting in the php.ini file if you have access or may have to ask your host to temporarily set it to 0 so you can complete the update.
I used: max_execution_time = 0 (which means no time limit)
4. If you have a failed upgrade I HIGHLY RECOMMEND that you delete all of the tables in your database and restore the backup of your 1.x backup from step 2 above. A failed upgrade leaves new tables in the db that may cause it to fail your next attempt too.
5. In order for me to be able to login to the admin panel I had to add the following two lines to the config.php file after the upgrade was successful.
$config['theme_folder_path'] = "e:/path/to/your/themes/";
$config['cp_theme'] = 'default';
NOTE: On Unix servers you would not need the drive letter in the “theme folder path”.