OK, this was a big problem for me too, so for the benefit of others I’ll post how I fixed it. I’m running 1.4 on a Media Temple DV server. I was only able to see a blank page on the Magento Connect page of the admin.
Magento is installed under a subdirectory of my main site. It appears that gives Magento Connect problems. After trying lots of file permission settings on lots of folders, I followed the advice of this thread and created a symlink that makes it appear as if the ‘downloader’ directory runs from the root directory. That command was:
ln -s /var/www/vhosts/yourdomain.com/httpdocs/store/downloader /var/www/vhosts/yourdomain.com/httpdocs/downloader
My ‘downloader’ directory permissions are 777, but my downloader/index.php permissions are 644 (not sure if this affects anything, but it works for me).
NOW: don’t try to access the downloader in its actual location, use the symlink you set up. So I had to go to mydomain.com/downloader instead of mydomain.com/store/downloader. The page should appear like normal and you should be able to install extensions now.