To further clarify:
1. Run the update. Go to menu, settings, about phone, system update. And download and install the update.
2. If your update works, it works. Your new system version should be 2.2.20.a955 or something. If you update fails, you need to find out why. My update failed because I have missing apps. More specically Mynet.apk (or 3G Wifi Hotspot). I was unable to reinstall that.
Or for some other reason why you can't update. If that's the case, you might need to flash the phone back to stock.