As users upgrade their software, in this case Apple's iLife (specifically iPhoto), they may find that some of their older databases are not able to be upgraded. While this does not occur often, it is a possibility. The most common reason is a corrupt iPhoto Library database file which often results in the failure to upgrade.
"We have been using iPhoto 08 for quite some time. Prior to upgrading to iPhoto 08 (from iPhoto 06), I had several iPhoto libraries...some backed up to external drives. Now I want to see some photos from one of those older, backed up libraries. When I try to open it in iPhoto 08, it says I need to upgrade the library. Fair enough.Unfortunately, when an iPhoto Library database file is damaged (the library6.iphoto file in this case), and iPhoto Library Manager cannot resolve the issue, the only recourse is rebuilding the iPhoto Library manually. You will lose your preference data (albums, books, keywords, edits) but your original photos will be preserved.
So I click Continue and then I immediately get a an error message saying the library is damaged and unreadable. If I use Terminal to examine the contents of the iPhoto directory...it seems everything is there (jpgs, AlbumData.xml...etc) and I can copy a jpg out of there and open it individually. So the data seems to be there. And AlbumData.xml is pointing to an existing location. But iPhoto 08 can't upgrade the library. What gives?
If I try to run iPhoto Library Manager, once I get by the selection screen it again tells me I need to upgrade and I get the same "unreadable" error so that doesn't seem to work."
Apple Support Discussions user "Terence Devlin" describes how to create and populate a new iPhoto Library:
"In the iPhoto Preferences -> Events Uncheck the box at 'Imported Items from the Finder'This is also the appropriate solution if you encounter the same upgrading issues with iPhoto '09. As always, MacFixIt recommends backing up your data before performing upgrade procedures.
Hold down the option (or alt) key key and launch iPhoto. From the resulting menu select 'Create Library'
Go into the damaged iPhoto Library and find the Originals folder. From the Originals folder drag the individual Roll Folders to the iPhoto Window and it will recreate them in the new library."
Read this Apple Support Discussions thread describing issues when upgrading older iPhoto Libraries.