Here is the contents of the bzr.log. The upload folder was empty before the bzr update. After the update the mentioned file did exist.

Mon 2011-08-08 11:45:18 +1000
0.062  bazaar version: 2.3.4
0.062  bzr arguments: [u'update', u'-r5325', u'E:\\BambooAgentData\\CPlusPlus\\xml-data\\build-dir\\CPP-TR-VSB']
0.078  looking for plugins in C:/Users/build/AppData/Roaming/bazaar/2.0/plugins
0.078  looking for plugins in C:/Program Files (x86)/Bazaar/plugins
0.171  encoding stdout as osutils.get_user_encoding() 'cp1252'
0.187  opening working tree '<path to bound checkout>'
0.218  bzr-svn: using Subversion 1.6.6 (), subvertpy 0.7.5
0.265  falling back to default implementation
0.265  failed to load system host keys: [Errno 2] No such file or directory: 'C:\\Users\\build/.ssh/known_hosts'
[13332] 2011-08-08 11:45:18.361 INFO: Connected (version 2.0, client OpenSSH_4.3)
[13332] 2011-08-08 11:45:18.562 INFO: Authentication (publickey) successful!
[13332] 2011-08-08 11:45:18.578 INFO: Secsh channel 1 opened.
0.873  Using fetch logic to copy between RemoteRepository(<remote repository location>)(RemoteRepositoryFormat(_network_name='Bazaar repository format 2a (needs bzr 1.16 or later)\n')) and CHKInventoryRepository('<path to shared repository>/.bzr/repository/')(RepositoryFormat2a())
0.873  fetch up to rev {some-revision-id}
6.287  abort_write_group failed
6.287  Traceback (most recent call last):
  File "bzrlib\repository.pyo", line 1019, in abort_write_group
  File "bzrlib\repofmt\pack_repo.pyo", line 2314, in _abort_write_group
  File "bzrlib\repofmt\pack_repo.pyo", line 2129, in _abort_write_group
  File "bzrlib\cleanup.pyo", line 135, in run_simple
  File "bzrlib\cleanup.pyo", line 165, in _do_with_cleanups
  File "bzrlib\repofmt\pack_repo.pyo", line 438, in abort
  File "bzrlib\transport\__init__.pyo", line 240, in close
KeyError: '<path to shared repository>/.bzr/repository/upload/2ztkfnfy72d4pwc232iq.pack'

[13332] 2011-08-08 11:45:24.367 INFO: bzr: ERROR (ignored): '<path to shared repository>/.bzr/repository/upload/2ztkfnfy72d4pwc232iq.pack'
6.302  Traceback (most recent call last):
  File "bzrlib\commands.pyo", line 927, in exception_to_return_code
  File "bzrlib\commands.pyo", line 1127, in run_bzr
  File "bzrlib\commands.pyo", line 692, in run_argv_aliases
  File "bzrlib\commands.pyo", line 714, in run
  File "bzrlib\cleanup.pyo", line 135, in run_simple
  File "bzrlib\cleanup.pyo", line 165, in _do_with_cleanups
  File "bzrlib\builtins.pyo", line 1413, in run
  File "bzrlib\decorators.pyo", line 194, in write_locked
  File "bzrlib\branch.pyo", line 2803, in update
  File "bzrlib\branch.pyo", line 1089, in pull
  File "bzrlib\decorators.pyo", line 194, in write_locked
  File "bzrlib\branch.pyo", line 3492, in pull
  File "bzrlib\branch.pyo", line 3602, in _pull
  File "bzrlib\branch.pyo", line 1038, in update_revisions
  File "bzrlib\decorators.pyo", line 194, in write_locked
  File "bzrlib\branch.pyo", line 3435, in update_revisions
  File "bzrlib\decorators.pyo", line 194, in write_locked
  File "bzrlib\branch.pyo", line 687, in fetch
  File "bzrlib\repository.pyo", line 1781, in fetch
  File "bzrlib\decorators.pyo", line 194, in write_locked
  File "bzrlib\repository.pyo", line 3437, in fetch
  File "bzrlib\fetch.pyo", line 73, in __init__
  File "bzrlib\fetch.pyo", line 99, in __fetch
  File "bzrlib\fetch.pyo", line 127, in _fetch_everything_for_search
  File "bzrlib\repository.pyo", line 4105, in insert_stream
  File "bzrlib\repository.pyo", line 1640, in commit_write_group
  File "bzrlib\repofmt\pack_repo.pyo", line 2333, in _commit_write_group
  File "bzrlib\repofmt\pack_repo.pyo", line 2176, in _commit_write_group
  File "bzrlib\repofmt\pack_repo.pyo", line 513, in finish
  File "bzrlib\transport\local.pyo", line 413, in rename
  File "bzrlib\transport\__init__.pyo", line 314, in _translate_error
FileExists: File exists: u'<path to shared repository>/.bzr/repository/upload/2ztkfnfy72d4pwc232iq.pack': [Error 183] Cannot create a file when that file already exists

6.302  return code 3