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First, what did you use to rename the files? If it was windows running in default mode you may have, in fact, update.zip.zip because windows hides the extensions to files unless you set it not to. This is a trap that many people fall into, not just with updating the PE.
You can check this by plugging the USB stick into your running PE and looking at it in the default file viewer - I'm not sure what that is in Dingo.
If it appears as update.zip.zip just rename it to update.zip and you should be able to update your PE.
Some people have reported problems with some USB sticks - especially large capacity ones but have managed to update by using another stick.
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