What i've noticed is that before throwing out this error, the script somehow drops the whole database. After this error there is no dbispconfig database in mysql.I've also granted the ispconfig user full privileges on all databases in order for it to be able to recreate the database but still no luck.
The "ispconfig" mysql user is not used during update. Please undo the permission changes that you did in mysql for this user. The updater only uses the mysql root user with the login details from the file /usr/local/ispconfig/server/lib/mysql_clientdb.conf. Maybe you changes the mysql root password without changing it in ispconfig which caused the update to fail?