2.5 Plugin upgrade funtionality question

I’ve installed WordPress about 10 times now and have always had great luck. However, during my latest install for a friend I came up against something I’ve not before..and it seems really simple, but I can’t figure it out. If I’m viewing my plugin list and there’s one with an available upgrade, when I click the ‘upgrade automatically’ it asks me for my FTP info – I’ve never had this happen before. So, the problem is that when I put in the host/user/pass for the server it just tells me “Error: There was an error connecting to the server, Please verify the settings are correct.” I’ve tried a dozen times and I know the info I’m putting in is correct. Is this an issues with server permissions or anything? I’ve created a wp-content/upgrade directory and it’s set to 755…what am I missing here?

Thanks in advance.