Keeping 1.1 is not an option since it is really old version – about 4 year old and we won’t be able do much about fixing the same. I am trying to see what’s wrong with the test site – but I am unable to delete the theme and reupload (we do have some errors in the page which suggest that theme files are missing). Can you pls look into the issue? Can you try to delete the existing 3.6 theme and reupload the latest version from the Themes page in WordPress Admin? Something not right with the test site configuration.
Alternatively, you can setup everything on your local machine using MAMP/WAMP to test out the new version instead of fighting server issues in the development server. Only disadvantage would be you won’t be able to share the link with us to a local installation.