Nicki, OK thanks for the help.
I just tried your last suggestion: I disabled .meta files, went to blank scene, deleted NGUI folder, imported 2.3.4, then restarted Unity. Then I went to my game scene, and went to Assets | import package | Custom package and imported the 2.5.0c package file. It imports as 2.3.4 (that's the name of the readme file shown). But If I go to an new empty project and import the same 2.5.0c package file, then it imports as 2.5.0c according to the readme file.
I am using Unity 4.1.0f4. Perhaps this is a new Unity feature where it wont allow you to overwrite a package with a different version of the same package? Maybe a Unity bug even? It sure just complicates this upgrade process even more.
Thank you for the suggestion about version control. I used to use Git, but as a solo developer I have in general found that Time Machine backups seem to suit my workflow better.
Guess I will stay at 2.3.4 until the upgrade process is a little clearer. Thanks