Not sure. I have never seem that issue before. Maybe before trying the upload, add the following lines inside the <connectionStrings> </connectionStrings> tags
<remove name="LocalSqlServer" />
<add name="LocalSqlServer" connectionString="Data Source=DBServerName;Integrated Security=false;Initial Catalog=DBName;User ID=DBLogin;Password=DBPassword" providerName="System.Data.SqlClient" />
see if the site still runs after that and is so, then upgrade.