SQL Server 2008 to 2008 R2 upgrade

I have been trying to upgrade SQL Server 2008 to the 2008 R2 version.  I was able to perform this on one server; however, the second server fails to upgrade.  I noticed that in theInstance Configuration step the install directory path, Default and named Instance radio buttons are grayed out.  Furthermore, when I get to theReporting Services Authentication step after selecting "Import" on the "Full-Text Upgrade" step it does not let me use windows authentication or the mixed mode login. It returns the below error:

[Error Message]
Use the Reporting Services Configuration tool to configure the database source name (DSN) and connect to the database.
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