Just spent all day figuring out why I had a Error 500 server problem when upgrading from WordPress 2.6.3 to 2.7. The site worked fine, but every time I clicked on the administratror panel link, I would receive a "Error 500" message. After hours of trying different things, including reinstalling WordPress 2.7, I stumbled upon this post:
The solution was to create a php.ini file that increased the php access size to 20 Mbytes. This seems to be related to 1 and 1 hosting (I didn’t have this problem when upgrading the WordPress site hosted on Lunarpages).
Am thrilled it is fixed and thank you very much to Brian Hatano for his insight in the WordPress forum.