Try using a different PC to do the update. I had the exact same problem with updating from 1.02 to 1.11, couldn't do it on my desktop. Kept getting 1602, 1604 and other errors. I had uninstalled and reinstalled iTunes, used different versions, etc. Nothing worked. Then I installed iTunes on my laptop, downloaded the 1.11 firmware, connected, and presto! Updated without issue to 1.11. Dunno why it worked, but it did.