I get the "The server instance specified was not found. Please specify
the server's address and port." error when using stsadm to install
webparts.
When I checked microsoft, it appears that our Default Web Site shows
"Upgrade" instead of "Extend" - here's the resolution: What is the risk
and how did this happen?

Top 3 Reasons for the "The server instance specified was not found.
Please specify the server's address and port." Error
<blogs.msdn.com/.../385816.aspx>
The easiest way to install web parts is probably to use this utility
from Microsoft called Install Assemblies
<download.microsoft.com/.../70ccc7c9-bad4-4d6e-afc7-68
a8048367f5/InstallAssemblies.zip> - very simple and intuitive
interface, takes care of creating the Safe Control entries and even
creating DWPs for your web part assemblies.
Install Assemblies internally uses STSADM.EXE - more than often you will
face the infamous "The server instance specified was not found. Please
specify the server's address and port." error. There can be many reasons
why you will face this problem, here are top three reasons I've seen in
the field either while installing web parts or while using Object Model
code -
1) WSS SP1 not installed on all components
Diagnosis: Go to SharePoint Central Administration -> Click Windows
SharePoint Services -> Click Extend or Upgrade a Virtual Server (Second
Link) -> In the virtual servers listed, do you see "Upgrade" next to
your SharePoint virtual server.
Resolution: Upgrade all your components to SP1 using the STSADM.EXE util
-> follow steps listed in this KB article
http://support.microsoft.com/?kbid=871149