Well, I just checked via cpanel and the plugin folder is still in my files.
I also had this error upon trying to update:
Warning: fopen(/home/…./plugins/digg-digg/digg-digg.php) [function.fopen]: failed to open stream: No such file or directory in /home/…./functions.php on line 3508
Warning: fread(): supplied argument is not a valid stream resource in /home/…./wp-includes/functions.php on line 3511
Warning: fclose(): supplied argument is not a valid stream resource in /home/…./wp-includes/functions.php on line 3514