I understand that the 2.6.8-2-686 kernel has security issues.

# uname -r
2.6.8-2-686

In an attempt to upgrade to 2.6.8-3-686  I encountered errors:

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# apt-get install kernel-image-2.6.8-3-686 kernel-headers-2.6.8-3-686
Reading Package Lists... Done
Building Dependency Tree... Done
kernel-headers-2.6.8-3-686 is already the newest version.
Suggested packages:
  lilo kernel-doc-2.6.8 kernel-source-2.6.8
The following NEW packages will be installed:
  kernel-image-2.6.8-3-686
0 upgraded, 1 newly installed, 0 to remove and 0 not upgraded.
3 not fully installed or removed.
Need to get 0B/15.5MB of archives.
After unpacking 45.2MB of additional disk space will be used.
(Reading database ... 82240 files and directories currently installed.)
Unpacking kernel-image-2.6.8-3-686 (from .../kernel-image-2.6.8-3-686_2.6.8-16sarge4_i386.deb) ...
You are attempting to install a kernel image (version 2.6.8-3-686)
However, the directory /lib/modules/2.6.8-3-686 still exists.  If this
directory belongs to a previous kernel-image-2.6.8-3-686 package, and if
you have deselected some modules, or installed standalone modules
packages, this could be bad. However, if this directory exists because
you are also installing some stand alone modules right now, and they
got unpacked before I did, then this is pretty benign.  Unfortunately,
I can not tell the difference.

If /lib/modules/2.6.8-3-686 belongs to a old install of
kernel-image-2.6.8-3-686, then this is your last chance to abort the
installation of this kernel image (nothing has been changed yet).

If this directory is because of stand alone modules being installed
right now, or if it does belong to an older kernel-image-2.6.8-3-686
package but you know what you are doing, and if you feel that this
image should be installed despite this anomaly, Please answer n to the
question.

Otherwise, I suggest you move /lib/modules/2.6.8-3-686 out of the way,
perhaps to /lib/modules/2.6.8-3-686.old or something, and then try
re-installing this image.
Do you want to stop now? [Y/n]    

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Not sure what to do here.  Any advice would be most appreciated.