The first problem with updating to WordPress version 2.8 was with the automatic update facility, the new version comes with it’s own automatic updater built in. This means the WordPress Automatic Update plugin is no longer required and should be disabled. The actual error message will vary according to the Theme that is in use on your site but will start with:
Fatal error: Cannot redeclare pclziputilpathreduction()
After disabling the WordPress Automatic Update plugin and clicking on the Automatic Update link on the dashboard again the update worked correctly. So that is easily dealt with and not a major problem.
The second problem was more serious, the automatic updates had overwritten the contents of the default theme with the original Kubrick design. If like me you have updated the default or the classic themes but never bothered to create a new theme then WordPress will replace your changed files with the originals.
Luckily in my case there was a backup that I could restore my changes from as I use SVN to store changes to code.
There is a message on the dashboard telling you to backup your files and database before doing the automatic update but many people will ignore this, I know I did!
I guess the moral of this story is to always make sure you have backups of your work before making changes, however tempted you may be to skip this annoying step, and also to create your own theme in WordPress rather than relying on making changes to the default or classic themes as WordPress obviously considers these fair game for overwriting without warning (something the old automatic updates plugin did not do).