Thanks for catching this. The "com.instantiations.xml" plugin has been removed and is no longer needed in the feature (but a stale reference remained). We've fixed it for the next beta (thanks!) In the meantime, you can get unblocked by editing the feature.xml yourself and removing the outdated reference.
The feature.xml is located in the features directory of your WindowTester installation (on my machine this is: C:\Program Files\Instantiations\WindowTester_v1.0.1\E-3.2\eclipse\features\com.windowtester.swt_1.0.1). The line you want to remove is:
Having done this, restart eclipse and try the update again.
If it fails, you should clear your old configuration information since its cached feature information is invalid. For tips on doing this, look at this FAQ entry:
http://www.instantiations.com/windowbui ... stallation
Let us know if you have any more problems. And thank again!