Thanks for the suggestion. I have been working with MS (Todd and Scott) on a resolution and I have just finished a successful test on my lab server. Here is what we found and tried:
NOTE: This was a specific fix for our situation (55 stores) - use with caution
What we have found is the issue is with the almost 24 million records in the ItemDynamic table; and it appears that changes have been made within SQL 2012 that allow the upgrade to complete without error.
However, on SQL 2008 R2 I was able to use the below steps as a workaround:
1. Make a backup of the HQ database.
2. Truncate the ItemDynamic table.
3. Upgrade the HQ database from 2.04 to 2.06.
NOTE: This completed in less than 5 minutes.
4. Restore the backup made in step 1.
5. Used the Export Data Task, within SQL Server Management Studio, to export the itemDynamic data from the database restored in step 4 into the database upgraded in step 3.
NOTE: The DBTimeStamp column cannot be copied.
6. Ran SQL scripts to verify data is complete.