I can see my thumbnails for my events in iphoto, but when I click to open the folder, no photos show up. However, when I hover over the thumbnail, it shows the flicker of images that should be inside the folder, as well as

Question

I can see my thumbnails for my events in iphoto, but when I click to open the folder, no photos show up. However, when I hover over the thumbnail, it shows the flicker of images
that should be inside the folder, as well as # of images in each folder. It also occasionally says the following when I try to even open iphoto:  "Your photo library will not be readable by previous versions of iPhoto after the upgrade. The upgrade process for very large libraries may take an hour or more to complete." So, I am scared to hit "upgrade" for fear I will never recover any of the images as the wording in this quote seems odd. The photos are not in the trash. Did I lose them all? Do you know if/how I can retrieve them?

Answer 1

iPhoto 08?
Try these in order - from best option on down...
1. Do you have an up-to-date back up? If so, try copy the library6.iphoto file from the back up to the iPhoto Library (Right Click -> Show Package Contents) allowing it to overwrite the damaged file.
2. Download iPhoto Library Manager and use its rebuild function. (In Library Manager it's the FIle -> Rebuild command)
This will create an entirely new library. It will then copy (or try to) your photos and all the associated metadata and versions to this new Library, and arrange it as close as it can to what you had in the damaged Library. It does this based on information it finds in the iPhoto sharing mechanism - but that means that things not shared won't be there, so no slideshows, books or calendars, for instance - but it should get all your events, albums and keywords, faces and places back.
Because this process creates an entirely new library and leaves your old one untouched, it is non-destructive, and if you're not happy with the results you can simply return to your old one. 
3. If neither of these work then you'll need to create and populate a new library.
To create and populate a new *iPhoto 08* library:
Note this will give you a working library with the same Events and pictures as before, however, you will lose your albums, keywords, modified versions, books, calendars etc.
In the iPhoto Preferences -> Events Uncheck the box at 'Imported Items from the Finder'
Move the iPhoto Library to the desktop
Launch iPhoto. It will ask if you wish to create a new Library. Say Yes.
Go into the iPhoto Library (Right Click -> Show Package Contents) on your desktop and find the Originals folder. From the Originals folder drag the individual Event Folders to the iPhoto Window and it will recreate them in the new library.
When you're sure all is well you can delete the iPhoto Library on your desktop.
In the future, in addition to your usual back up routine, you might like to make a copy of the library6.iPhoto file whenever you have made changes to the library as protection against database corruption.