you cannot install the european firmware with s-on. period.
your options to update firmware,are:
1) to run t mobile ruu to update to latest t mobile firmware,and stay s on. possibly forever unless new exploits are found
2)s-off. you can then install the new t mobile firmware by flashing a custom pacakge,or running the full ruu. with s off you also have the option to install the recomended european firmware.
you do have a third option- just run ARHD on your current firmware. it prolly is running fine
the latest t-mobile baseband is Radio_4A.17.3250.20_10.40.1150.04
i would pretty strongly recomend to take advantage of s off exploits while they are available. there are no gaurantees new ones will be found.