Plugin Auto Updates

For some reason in the last week the wordpress feature which automatically updates plugins has stopped working. I think it’s because it’s trying to upload to the incorrect location. But, i can’t find the location of the setting that determines this.
I’m actually still on wordpress 2.6.3 but it wasn’t an option in the drop down.
Would upgrading to the latest version help correct this?
I am going to try doing this now while i wait, as i’ve just found a plugin that will do wordpress updates automatically too so i should then be more uptodate.

My blog is hosted on bluehost if that helps, and it seems to be trying to parse my username for logging into my host as part of the url it’s trying to upload to which i don’t think is correct.

Thanks