The failure occured while the installer was attempting to update several sections of the web.config configuration file, probably for the same reason that the 5.05.00 version of the CoreSiteMap provider failed ot install. I don't think that it is due to insufficient permissions on the web.config file as several other extensions as well as the 5.06.00 framework upgrade successfully make changes to web.config. That makes me wonder if one or more sections of the web.config file were corrupted on a prior install or had perhaps been manually modified  sometime in the past.

When you tried reinstalling the Telerik module and the TelerikEditorProvider provider, were there similar errors (in the Config installer) reported or logged?

One would have to compare your site's web.config with ones from a clean and working 5.05.01 and 5.06.00 DotNetNuke installation to determine if it is a corruption of web.config that is causing the failures.

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Bill, WESNet Designs
Team Lead - DotNetNuke Gallery Module Project (Not Actively Being Developed)
Extensions Forge Projects . . .
Current: UserExport, ContentDeJour, ePrayer, DNN NewsTicker, By Invitation
Coming Soon: FRBO-For Rent By Owner

That is a fairly common error and indicates that either the latest Telerik.Web.UI.dll assembly did not get installed into the /bin folder or that the bindingRedirect for the Telerik components did not get properly updated in the web.config file. To fix:

1. Check that the Telerik.Web.UI.dll assembly now in the site's /bin folder is that of version 2010.2.929.35. If not or if you are not able to determine that, extract the package Telerik_05.06.00_Install.zip from the DotNetNuke_Community_05.06.00_Upgrade.zip that you used for the upgrade. It will be found in the upgrade package's /Install/Module folder. Then, extract the Telerik.Web.UI.dll assembly file from the Telerik_05.06.00_Install.zip package and copy to the site's /bin folder.

2. Check that the following bindingRedirect markup is found in the site's web.config file and correct the newVersion number if necessary:

<runtime>
    <assemblyBinding xmlns="urn:schemas-microsoft-com:asm.v1">
      <probing privatePath="bin;bin\HttpModules;bin\Providers;bin\Modules;bin\Support;" />
      <dependentAssembly>
        <assemblyIdentity name="System.Web.Extensions" publicKeyToken="31bf3856ad364e35" />
        <!--Upgraded by .NET 4.0 Upgrade version 5.6.0 - Date: 11/22/2010 10:14:14 AM-->
        <!--<bindingRedirect oldVersion="1.0.0.0-1.1.0.0" newVersion="3.5.0.0" xmlns="urn:schemas-microsoft-com:asm.v1" />-->
        <bindingRedirect oldVersion="1.0.0.0-1.1.0.0" newVersion="4.0.0.0" />
      </dependentAssembly>
      <dependentAssembly>
        <assemblyIdentity name="System.Web.Extensions.Design" publicKeyToken="31bf3856ad364e35" />
        <!--Upgraded by .NET 4.0 Upgrade version 5.6.0 - Date: 11/22/2010 10:14:14 AM-->
        <!--<bindingRedirect oldVersion="1.0.0.0-1.1.0.0" newVersion="3.5.0.0" xmlns="urn:schemas-microsoft-com:asm.v1" />-->
        <bindingRedirect oldVersion="1.0.0.0-1.1.0.0" newVersion="4.0.0.0" />
      </dependentAssembly>
      <dependentAssembly>
        <assemblyIdentity name="Telerik.Web.UI" publicKeyToken="121fae78165ba3d4" />
        <!--Upgraded by DotNetNuke.Telerik.Web version 5.6.0 - Date: 11/18/2010 12:23:35 PM-->
        <!--<bindingRedirect oldVersion="2008.0.0.0-2020.0.0.0" newVersion="2010.02.0929.35" xmlns="urn:schemas-microsoft-com:asm.v1" />-->
        <bindingRedirect oldVersion="2008.0.0.0-2020.0.0.0" newVersion="2010.02.0929.35" />
      </dependentAssembly>
    </assemblyBinding>
  </runtime>

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Bill, WESNet Designs
Team Lead - DotNetNuke Gallery Module Project (Not Actively Being Developed)
Extensions Forge Projects . . .
Current: UserExport, ContentDeJour, ePrayer, DNN NewsTicker, By Invitation
Coming Soon: FRBO-For Rent By Owner

William, thanks for this post, I followed your advise and got our site working again after upgrading.....