I have the same issue, I download the ISO and booted to the CD. I got an internal error message after the 20-30 seconds the update was scanning my HD, then a green screen saying the update was finished. The hard drive was operational but it said "no operating system". I booted into bios and the hard drive had the model number of the 80GB version, even though I have the 40GB. I tried to reinstall windows but got a blue screen. I've worked with it trying to update via usb flash drive, but came up with the same error. Now the bios will not read the HDD. I called Dell, they are sending me another HD. Hope this helps. The guy in the post above me said his was still broken after HD replacement, which dosen't make sense unless it was a cable on his machine.
Just to vent a little the dell tech on the chat didn't want to setup a replacement because the computer came with Ubuntu and that was another department. What a duche-bag, I mentioned it didn't matter if the operating system was Mac OSX the hard drive was dead, and if he couldn't replace it I would happily speak to his supervisor. He decided to agree and replace the HD. It just irritated me a little.
There is definitely a problem with this firmware update that Dell needs to address. If you are lucky enough to read this before you try the firmware update, don't do it, it's too risky.
I would like to know if anyone has had success using this update?