Everything went ok, backup, upgrade procedure and so on.

Suddenly I have realized that none of the links that are permalinks doesn’t work.

I have tried all possible things that I could remember how to fix it including reconfiguration of Apache and different .htaccess files.

After some time when any of these things didn’t work I got idea to delete all files and install WordPress again with old database.

Directly after I deleted files and copied new ones, permalinks started to work.

Only one thing was different between new and old installations and that were plugins.

So next step was to copy all plugins back and see if everything works or error would come back with them too.

Plugins copied, error present, so next step was to disable plugins one by one and find the one that is causing this error.

Finaly, I have found that WPG2 plugin was cause of this error and that easiest fix for rewrite problem is to disable plugin and then to activate it again.

After this everything worked like it should, all plugins that I had, permalinks and I had the latest version of WordPress installed.