Most of the times, upgrading your Magento store via Connect Manager gives you error. If you upgrade manually via FTP, you can get success easily in upgrading.
All you have to do is follow the below mentioned steps for upgrading Magento from 1.6 to 1.7 using FTP.
The first step is about taking the backup of Database and Website Files. Please make sure you take a complete backup before experimenting something new.
Now create “Test” directory in your Magento Install.
Read Complete Tutorial Here: