I'm guessing the short error you get says somet like "hibernate image too old..."? If so, and this is a total guess on my part, I think making sure hibernation is disabled and quiet boot is enabled in NBI 84 will kill that. Again, I have no clue, butmy mini boots directly to OSX. No chameleon, nothing. I turn it on, see the Dell startup for like one second, then grey screen with the apple and spinning wheel. I'm attributing it to that, even if it's wrong.
I would imagine that if you are on 10.6 right now, and everything is good, using 84 then updating should work. Maybe, instead of starting all over, try 83, restart, install 84 and run, then do update. Sounds better than scratching it all, and it seems like you already tried 84 straight to update, bypassing 83 altogether, and are having troubles. I don't know what will happen if you run 83 after 84 though...
I'm definitely no expert and am honestly kinda shocked that the only problems I've had so far are the sound issues that is fairly common and the NBI issues with iPhoneSDK. Maybe someone else wants to chime in...either way, don't hate me if I'm wrong