Few customers have seen failures in upgrading WSS2.0 to WSS3.0. When they run the upgrade utility the process fails after step 2. It is helpful to take a look at the log file but in many cases the upgrade has succeeded if you run the upgrade with forceupgrade option. Here is a command that was tried by one customer and they were able to successfully upgrade the WSS server.
In place upgrade:
%commonprogramfiles%\Microsoft Shared\Web Server Extensions\12\Bin stsadm -o upgrade -forceupgrade -url http://companyweb – inplace
Side by Side Upgrade:
%commonprogramfiles%\Microsoft Shared\Web Server Extensions\12\Bin stsadm -o upgrade -forceupgrade -url http://companyweb – sidebyside