If you have problems with updating or with the permissions then easiest is to download the full version and trash the currently installed version to do a clean install of the new version.

Download a new copy of the Firefox program and save the DMG file to the desktop

• Firefox 5.0.x: http://www.mozilla.com/en-US/firefox/all.html
• Firefox 3.6.x: http://www.mozilla.com/en-US/firefox/all-older.html

• Trash the current Firefox application to do a clean (re-)install
• Install the new version that you have downloaded

Your profile data is stored elsewhere in the Firefox Profile Folder, so you won't lose your bookmarks and other personal data.

I have this problem too and doing what was suggested - downloading from scratch does not solve the problem. Still get the same error message. Just tried that.

Did you move the Firefox 3.0.6 installation to the trash?