3.3 installation then 3.4 update

I got 3.3 installed and working, but very slowly. When I try upoloading media I get error messages.

Now I tried auto upgrade to 3.4 and got an immediate ftp error as follows:-
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Update WordPress
Downloading update from http://wordpress.org/wordpress-3.4-no-content.zip…
Warning: touch() [function.touch]: Unable to create file D:\inetpub\vhosts\intatrade.com\httpdocs/wp-content/wordpress-3.tmp because Permission denied in D:\inetpub\vhosts\intatrade.com\httpdocs\wp-admin\includes\file.php on line 177

Warning: unlink(D:\inetpub\vhosts\intatrade.com\httpdocs/wp-content/wordpress-3.tmp) [function.unlink]: No such file or directory in D:\inetpub\vhosts\intatrade.com\httpdocs\wp-admin\includes\file.php on line 509

Download failed.: Could not open handle for fopen() to D:\inetpub\vhosts\intatrade.com\httpdocs/wp-content/wordpress-3.tmp
Installation Failed
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The first part of the string “D:\inetpub\vhosts\intatrade.com\…” is very similar to the original issue with failed media uploads. So I suspect this is the root of my problem and request for help. What did I do wrong with original installation?