I am doing a test update and was suprised to get the following displayed
Have I done something wrong or is it normal for all existing posts to be wiped when updating?
I have double and triple checked that I have downloaded the upgrade and not the full installation but it is only 2KB smaller???
You need to make sure that you're merging the directories rather than straight overwriting them -- it's possible that you've wiped out your library/config.php file (and possibly your data/ and internal_data/ directories though hopefully not). Different clients may have different default approaches.
If you go to <url>/install/index.php?upgrade/ that may suffice. (At least if you've regenerated the config.php if it was removed.)
Well the other file that could be missing is internal_data/install-lock.php, which would indicate that internal_data/ and data/ were wiped out (which would take out attachments, avatars, etc). I'd strongly recommend restoring from a backup if that's the case.
If not, you can manually create internal_data/install-lock.php (doesn't matter what's in it, it just needs to exist).
The file did exist as when trying Mikes suggestion that If you go to <url>/install/index.php?upgrade/ that may suffice I was told that the installation was already complete and to delete the file if I wanted to install again.
This evening I will try a fresh test install of 1.2.1 and then try to upgrade it again just in case I have done something wrong.