The Kunena team has announce the arrival of Kunena 7.0.4 [K 7.0.4] in stable which is now available for download as a native Joomla extension for J! 5.4.x/6.0.x. This version addresses most of the issues that were discovered in K 6.2 / K 6.3 / K 6.4 and issues discovered during the last development stages of K 7.0
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Question
Proper steps to upgrade from Kunena version 1.6.1. to 1.6.3.
(1) Starting at the root folder and propagating through all folders on your website, set the folder permissions to 644 and the file permissions to 755.
(2) Starting at the root folder and propagating through all folders on your website, make sure the folders and files are all owned by Apache
(3) Download and use the .ZIP file for the K 1.6.3 installation. Let us know if this works. If this doesn't work, I have few dozen other suggestions that I can offer. So let's start with suggestion #1 and work our way through them, one by one. Does that sound reasonable?
You should first check if you can upload files into server that are over 2M (default limit). If not, you need to raise value from that php setting or remove some languages from our zip file.
Also trying install by using bz2 may help..
Uninstall (from Joomla extensions manager) is a good choice if you want to make sure that there's nothing in kunena directories blocking up installation process..