Microsoft SQL Server 2005 Mobile Edition (SQL Server Mobile) maintains two versions of the product side-by-side. The two versions of SQL Server Mobile can coexist on the same computer. This enables a simple and gradual upgrade process.
The documentation on how this can be done can be found here:
http://whidbey.msdn.microsoft.com/library/default.asp?url=/library/en-us/ssmmain3/html/36976e7b-39f3-4837-891e-cd16300ffa5e.asp

However when I attempted to perform this task on my Pocket PC 2003 device, I got the following error:

Connecting to source database
Creating destination database
Unable to instantiate SQL CE 3.0 provider
 
HRESULT: 0x80040154
Database upgrade failed

After doing some further investigation, I discovered that it was unable to instantiate the SQL Server Mobile OLE DB Provider (sqloledb30.dll). Some further search through the documentation revealed that this dll resides in sqlce30.repl.platform.processor.cab.
See the following link http://whidbey.msdn.microsoft.com/library/default.asp?url=/library/en-us/ssmmain3/html/15cf980e-4230-4629-acd7-33817c670f51.asp
 
So in order for me to successfully upgrade my database (I’m assuming here that the device already has SQL Server CE 2.0 installed) I need to ensure that I have deployed and installed the following cabs:
1. sqlce30.platform.processor.cab
2. sqlce30.repl.platform.processor.cab
3. sqlce30.dev.lang.platform.processor.cab (useful for getting error descriptions).

I erroneously forgot to install sqlce30.repl.platform.processor.cab. Once I installed this, the upgrade process was successfully completed.

I believe this might be helpful someday just in case someone out there attempts to upgrade their database and runs into the same issue.