rhippy: That's something I found out too, it fails when trying to upgrade. Anyone else ran into this? Any benefits to the newer version that stand out or is it small peanuts in the grand scheme of things?
So far: installed superuser, busybox, root app delete, launcherpro and juicedefender. Got rid of all the crap (NFL whatever, verizon stuff, bing stuff, dock loader, skype, some other stuff) and the phone is REALLY quick now. Exactly what I was looking for
Undesired: I skipped that step and hooked the phone up to my computer (unchecked usb debugging) and changed the connection type to mass storage. It then shows up as a removable device when I open up My Computer, like a USB stick. Normal copy/paste works here, it'll probably work better for you (worked better for me, SDK and ADB was all new to me).
It should then be on your SD card, then continue on.