I ran into this beauty with my latest attempt to install a WordPress theme:
Unpacking the package…
Could not create directory.
After a brief “wtf?!” and nothing in the Apache error log or a quick search, I did the following from the root of my wordpress install to save the day:
chmod 777 wp-content/upload
AND THAT FAILED too!
To the rescue… edit your wp-config.php file and put this line at the bottom:
so that instead of trying to use FTP or FTPS to transfer files, they are directly transferred.