Windows 8 upgrade fails

Upgrading windows 8 keeping programs and settings is not working. It fails at 47% of migrating settings and rolls back.

This is the relevant part of the log (Sources/Panther/setuperr.log):

2013-02-03 00:02:02, Error      [0x0803b6] MIG    Can't retrieve group information for user NT SERVICE\MSSQLFDLauncher. NetUserGetLocalGroups failed 0x000008AD
2013-02-03 00:30:39, Error                 MIG    COnlineWinNTPlatform::AddPathToSearchIndexer - Failed to create CSearchManager instance, error: 0x80070422[gle=0x000003f0]
2013-02-03 00:32:02, Error      [0x0808fe] MIG    Plugin {ee036dc0-f9b7-4d2d-bb94-3dd3102c5804}: BRIDGEMIG: ParseRegistryIfBridgeExists: query bridge presence key failed 0x139f, bridge present = 0
2013-02-03 00:32:02, Error      [0x08038d] MIG    Failure while calling IPostApply->ApplySuccess for Plugin={ServerPath="%windir%\system32\Migration\netiomig.dll", CLSID={ea51459a-a30d-4a33-b294-0e0163551c75}, ThreadingModel=Apartment}. Error: 0x8007000D
2013-02-03 00:32:02, Error                        Error READ, 0x0000000D while gathering/applying object: apply-success, Action,CMXEPlugin,C:\$WINDOWS.~BT\Sources\WorkDir\MachineSpecific\Working\agentmgr\CCSIAgent,%windir%\system32\Migration\netiomig.dll,{ea51459a-a30d-4a33-b294-0e0163551c75},Apartment. Will return 2[gle=0x000000cb]
2013-02-03 00:32:02, Error      [0x08038d] MIG    Failure while calling IPostApply->ApplySuccess for Plugin={ServerPath="Microsoft-Windows-DirectoryServices-ADAM-Client\adammigrate.dll", CLSID={43CCF250-2A74-48c6-9620-FC312EC475D6}, ThreadingModel=Apartment}. Error: 0x80070002
2013-02-03 00:32:02, Error                        Error READ, 0x00000002 while gathering/applying object: apply-success, Action,CMXEPlugin,C:\$WINDOWS.~BT\Sources\ReplacementManifests,Microsoft-Windows-DirectoryServices-ADAM-Client\adammigrate.dll,{43CCF250-2A74-48c6-9620-FC312EC475D6},Apartment. Will return 2[gle=0x000000cb]
2013-02-03 00:32:02, Error      [0x0808fe] MIG    Plugin {C939EC0F-2F56-4CE8-AF56-2336596A5FA7}: failed to get pnpx db file size
2013-02-03 00:32:02, Error      [0x0808fe] MIG    Plugin {C939EC0F-2F56-4CE8-AF56-2336596A5FA7}: Failed to migrate the pnpx db
2013-02-03 00:42:09, Error      [0x0803b6] MIG    Can't retrieve group information for user NT SERVICE\MSSQLFDLauncher. NetUserGetLocalGroups failed 0x000008AD
2013-02-03 00:48:34, Error                        Error WRITE, 0x00000005 while gathering/applying object: File, C:\Users\Yishai\Pictures [1.JPG]. Will return 0[gle=0x00000005]
2013-02-03 00:48:34, Error                 MIG    Error 5 while applying object C:\Users\Yishai\Pictures\1.JPG. Shell application requested abort[gle=0x00000005]
2013-02-03 00:48:34, Error      [0x08097b] MIG    Abandoning apply due to error for object: C:\Users\Yishai\Pictures\1.JPG[gle=0x00000005]
2013-02-03 00:48:34, Error                        pUpgLayerDoOnlineApply: Apply operation failed. Error: 0x0000002C
2013-02-03 00:48:34, Error      [0x0802f5] MIG    CMediaManager::Close: m_pSelectedTransport->Close(1) failed with Exception Win32Exception: Device was open with readonly access.: Access is denied. [0x00000005] void __cdecl Mig::CMediaManager::CloseTransport(int)
void __cdecl Mig::CUNCTransport::Close(int).
2013-02-03 00:48:34, Error                        MigCloseCurrentStore caught exception: Win32Exception: Device was open with readonly access.: Access is denied. [0x00000005] void __cdecl Mig::CMediaManager::CloseTransport(int)
void __cdecl Mig::CUNCTransport::Close(int)
2013-02-03 00:48:34, Error                 CONX   Apply: Migration phase failed.[gle=0x00000003]

Before it was complaining about things in the Music directory. I deleted the whole thing, now it moved on to Pictures, so clearly the problem is not the file. I tried resetting the permissions on the Users folder, and it went through most of them (it complained about some things being unchangable, but not the pictures folder.

What could be the soure of the problem?

Edit: Disk space shows 109GB used out of 138GB total, 28.8GB available, this is with Windows 8 already downloaded and using up about 2GB of space.

It looks like file permission problems (Read/Write). You can try to reset the Windows permissions to default. I had some issues that caused Windows to fail while installing updates.

Run command prompt as Admin and change the directory to the drive root by typing the following.

CD "C:\"

Then copy and paste this command

icacls * /T /Q /C /RESET

This worked in my case and updates went smoothly.