WordPress 3.0 – Can’t automatically update plugins

You may need to increase PHP’s memory allocation.

First, try installing the Memory Bump plugin.

If that doesn’t work, here are four ways to increase PHP’s memory allocation:

1. If you have access to your PHP.ini file, change the line in PHP.ini
If your line shows 32M try 64M:
memory_limit = 64M ; Maximum amount of memory a script may consume (64MB)

2. If you don't have access to PHP.ini try adding this to an .htaccess file:
php_value memory_limit 64M

3. Try adding this line to your wp-config.php file:
Increasing memory allocated to PHP
define('WP_MEMORY_LIMIT', '64M');

4. Talk to your host.