@westi, thank you for the info :)
@utregfanatic, 32M may be the max your web-host will allow. If you're having trouble now with memory on an upgrade, I'm afraid to say that going to 3.0 with the automatic updater won't make your life much better. Yet. WP's working on a long term fix, but there is a known issue where WP needs 256M (I think) to do the whole download, unzip and install, which gets hinky sometimes.
The most reliable install method remains the manual one, and I promise it's really not that hard :) My 5-step command line process works like a champ (though ALWAYS make a backup first ;) ).