After a week of searching here is what I've found. Yay!! Spread the word. There are a lot of people trying to get this problem resolved. (I've included the link to the actual site.)
Re: Problems with installation of update for Build Number: 4.08.605.2 - Verizon Droid Incredible - Android 2.3.4 - DROID INCREDIBLE by HTC (Verizon) - Android Forums - HTC Community
Okay, I have fended several issues just getting Gingerbread Baked! The first update was deployed 11/15/11 with no issues. This was build 4.06 On 11/16/11 the second update (4.08) attempted install and failed with the dreaded "Low Space" error. After that, I got stuck in the eternal non-reboot issue. To get this out of the way: Disclaimer, I do not take responsibility for your device. But... It seemed to be a pretty simple fix for me.Remove any unused apps you can. These can be reinstalled later!Boot into recovery
When the white HBOOT screen appears, use the volume button to move down to “RECOVERY.”
- Press and hold Power, Choose "Restart" option
- When screen turns off, press and hold Volume Down and Power
Press the Power button to select “RECOVERY.”
When the triangle and exclamation appears, hold the Volume Up and Power button at the same time.
Using the volume button, scroll down to “Wipe cache partition” and select it.
Select "Reboot system now"When the system restarts, go to Settings>About Phone>System Updates. Chances are the update is NOT there.Go to Settings>Set Time & Date. UNCHECK "Use Network Time"Reset your clock for 1 MONTH aheadGo back to Settings>About Phone>System UpdatesYou should get the update now and it should install and reboot flawlessly. Hope this helps.
You may also need to reset the time to 12:30am.