File Transfer failed, reason: Unable to change to directory
Try executing your chown command recursively, and also assign an explicit user and your web server's group, like so: sudo chown my_user:www-data sites/all/* -R where my_user is your id and www-data is your web server's group. This will recursively apply ownership to your entire directory tree.

It might also be worth pointing out that you mention assigning ownership and privileges to sites/default, but your error messages indicate that the problem is in sites/all. :-)

In my experience, failed uploads or updates are almost always due to incorrect ownership.