Your existing project directory has, at the topmost level, a file named symfony with contents that look like (after the copyright notice):

chdir(dirname(__FILE__));
include('config/config.php');
include($sf_symfony_data_dir.'/bin/symfony.php');

This file needs to be updated to use the new configuration mechanism. If you haven't changed this file from the 1.0 original, you can simply copy the new skeleton from the 1.1 tree, $SYMFONY_1_1/lib/task/generator/skeleton/project/symfony. If you have changed it, you should edit it as follows.

You should change it to look like:

chdir(dirname(__FILE__));
require_once(dirname(__FILE__).'/config/ProjectConfiguration.class.php');
$configuration = new ProjectConfiguration();
include($configuration->getSymfonyLibDir().'/command/cli.php');

Next step: Create ProjectConfiguration.class.php?