Did used infrared to deploy OSP8 environment and following the steps for upgrading OSP8 to minor release of OSP8 before doing OSP8 -> OSP9. Apparently, the part of openstack undercloud upgrade, is relaying on hiera data as referenced bug: 1410218 and tryes to enable docker-registry, which has been obsoleted by installed package docker-distribution. Manifests try to ensure that the service is started and it fails as the systemd unit file is missing.
Creating a symbolik link from docker-distribution systemd unit file to docker-registry, allows the pgrade to continue and works apparently ok. Prior to that: 2017-03-03 10:26:39,017 INFO: Notice: /Stage[main]/Main/Package[docker-registry]/ensure: created 2017-03-03 10:26:44,115 INFO: Error: Could not start Service[docker-registry]: Execution of '/bin/systemctl start docker-registry' returned 5: Failed to start docker-registry.service: Unit not found. 2017-03-03 10:26:44,116 INFO: Execution of '/bin/systemctl start docker-registry' returned 5: Failed to start docker-registry.service: Unit not found.