How to make the automatic update work with your WordPress blogs that are hosted on 1and1 shared servers. These are blogs that you set up yourself, not the blog that 1and1 can install for you.
The problem I was having was the update would start, and then just stop after a few seconds.
Then in my wp-content folder I would see a bunch of failed downloads. They were the update zip files with a 0 byte size.
Add the following lines to your .htaccess file in the root directory of your blog.
AddType x-mapp-php5 .php
This will enable PHP version 5 + on your blog and then your update should take off.
The update to PHP 5 should also make your blog run a little faster and better.