Brian posted about the cumulative update for TFS (the TFS SKU, not the client/VS) back in June. After it was released we learned of a couple of bugs in it, including one where upgrades would not work in certain cases. Last Thursday, we re-released it with all of the known bugs fixed. We understand where we went wrong, and we apologize for the inconvenience.
You should apply this update to the server, build machine, proxy, and SharePoint extensions – all of the things that the TFS SKU installs. SP1 is a pre-requisite (i.e., this patch does not include SP1).