Problem upgrading fbsd-7.4 --> 8.3

[Jack Stone]

Am trying to upgrade fbsd-7.4 to 8.3. I get all the way through the 
usual procedure using sources, including installworld, when I attempt 
to run mergemaster as the final step, I get this fatal error.

I've searched the list and google, but don't find the right answer. 
What am I possibly doing wrong and what should I do to get around this?

The error:
mail# mergemaster -viF

*** Creating the temporary root environment in /var/tmp/temproot
  *** /var/tmp/temproot ready for use
  *** Creating and populating directory structure in /var/tmp/temproot

  *** Press the [Enter] or [Return] key to continue

   *** FATAL ERROR: Cannot 'cd' to /usr/src and install files to
       the temproot environment

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All the best,
Jack