I generally find it easier to bring up a new DNN 3.x / 4.x instance and manually migrate the content. 

The reason for this is as follows:

1. 3rd party modules are going to break and you will end up installing upgraded module (which can have their own set of issues) or possibly even a new product entirely
2. Skins and Container will need to be rebuilt (or at least that has been my experience)
3. If you are planning to install the source version of DNN 4.0 and open it in VS.Net issues can happen because of the way VS.Net handles web projects in 2005
4. You will most likely want to reorganize your data (especially files since 4.x has a far better file management system)
5. You simple do not know how an upgrade will go until you do it
6. The list goes on

I hope this information is helpful.

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Best Regards,

Robert J Collins | Co-Founder & President

Netlogic Corporation

I do not know of any way to "Manually" upgrade.  If you cannot get the auto upgrade to work, you may need to consider installing a new version of DNN, installing any 3rd party modules you need/want, installing/uploading a compatible version of your skin, and lastly copy/pasting all of the content...

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Best Regards,

Robert J Collins | Co-Founder & President

Netlogic Corporation