Trouble Upgrading to 3.5.1

Helping some upgrade their WordPress Site I found this message after upgrading.
Fatal error: Call to a member function add_rewrite_tag() on a non-object in /home/moldguy/public_html/wp-includes/rewrite.php on line 51

This is line 51:
$wp_rewrite->add_rewrite_tag( $tagname, $regex, $query );

The site is functioning properly but I cant access the dashboard.
I have completely reloaded the site and then I can access the dashboard with all its functions working. It just the 2.7.1 version.

Any ideas on what I need to do to upgrade his wordpress. I have even tried deleting the entire site and manually uploading the 3.5.1 version with the theme and plugins and then changed the wp-config.php so the database would connect. Still the same thing the site is up but cant access dashboard with this message.

Any help would be greatly appreciated!