I've read somewhere on this board about uninstalling and reinstalling the device drivers, but I can't be sure. I never made it that far. The fact that you've unlocked the update button is, in my mind, a step in the right direction.
Be sure to try some of the other suggestions in this thread, including using the original Sony Connect CD\Software, and flashing to the original firmware first. You can also try a different USB cable, in case the cats chewed on your original
Don't feel too left out regarding the Sony update. The Sony ePub update "Terms and Conditions" explicitly states that the unit must arrive in a fully functional condition. No other repairs will be made during the update. I'm just crossing my fingers that they are a little flexible with this policy. It is en route as we speak.