After attempting to update my friend's pocket eDGe about 12 times, and reading over every single post here (thank you) I determined that I was not doing anything wrong.
I downloaded the file from the torrent, and various other sources - fc said files were identical, so that was never a problem
hint: if you cannot open update.zip on your windows computer, or on the eDGe itself, the file is corrupt. If you can open the update.zip file, it is fine.
LOST.DIR is perfectly normal. just leave it be.
I reformatted my USB stick (512MB) as FAT, FAT32 - didn't matter
on a whim, I dug up another USB stick (1GB), FAT32, full of files - didn't even bother to format it.
put update.zip on it and it worked on the first try.
So, my advice: try several USB sticks!
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