Any other instance running on that server?

The file be held by some other process. Hope you have already tried keeping the file in other sub-directory or another drives.

Can you see Lock Icon on those files?

Thanks Anthony

Is there anyway this can happen?? I mean other than application or code??

You sure you are selecting the correct file?

Did you configure AO or is it was an existing setup?

Thanks Anthony.

Went with this link

http://blogs.msdn.com/b/arvindsh/archive/2012/09/08/how-to-assign-a-static-port-to-a-sql-server-named-instance-and-avoid-a-common-pitfall.aspx

Thanks Anthony. PFA

Thanks Jak,

Only check constraints can be disabled right?

Are you trying to install from existing node?

Did you check the log shipping monitor tables?

What is the status of secondary DB?

Seems like you made the DB to Single USer but some other connection is holding the DB. SQL Agent might be holding check the processes access the DB. Kill all...

Changes in objects ,new objects

you sure you went for installation ,seems like you clicked on Edition upgrade.

In your step up automatic failover of AO wont happen but cluster failover should happen. Did you check cluster logs?

You mean to say you have a 2 node SQL Server failover cluster and AO is in one of the nodes?