I am having a similar issue.
I am running Baseband version S

700.0.5S.EC05
Kernel version 2.6.32.9
Build number Twilight Zone v1.1.1RC2 - Hajime-taisho
Binary Updater
New version of su binary found
Update now?
Downloading manifest ... okay!
Parsing manifest... okay!
Latest version = 3.0.3
Checking installed version = 2.3.1-ef
When update is selecetd following message occurs
This updater is incapable of updating your su binary since
it is installed in /sbin. this is
not an error in the updater, it is an error on behalf of your ROM or kernel developer.
You can continue to use Superuser with your outdated binary.
Does anyone have a suggestion on how to update this binary?
Thanks