Okay, we are rapidly closing in on the problem here.
I believe that you are installing the wrong jailbreak version.
Now I need your firmware version. Please do this:
Press Home button.
Press Menu buttun.
Select Settings menu item.
What version is reported on the bottom status line?
If you are using firmware version 3.3, please read this:
Spoiler:
Note for Kindle >= 3.2.1 Users:
Please use the file corresponding to your kindle model suffixed by -3.2.1, the other one won't work on these newer FW versions, while the -3.2.1 file won't work on older FW versions. Check your Settings page if you're unsure of what FW your Kindle is running.
Download the attached kindle-jailbreak-0.10.N.zip file, and unpack it. In here, you'll find a bunch of .bin files, and a src directory.
Leave the directory alone, and upload the correct update_*_install.bin file for your kindle & FW version to the root directory of your Kindle.
(As always, k2 means K2 US, k2i means K2 GW, dx means KDX US, dxi means KDX GW, dxg means KDX Graphite, k3g means K3 3G (US [B006]), k3w means K3 WiFi [B008] and k3gb means K3 3G (UK [B00A]). The ones suffixed by -3.2.1 are meant for devices running FW >= 3.2.1 *only*!).
For a Kindle 2 International, that would be update_jailbreak_0.10.N_k2i_install.bin for example.
Now, eject your Kindle, and go to [HOME] -> [MENU] > Settings -> [MENU] > Update Your Kindle. It should be quick. (And, on FW 2.x only, it should FAIL (With a U006 error, in the bottom left corner of the screen). It's completely normal, intended, and harmless).
And that's it, your Kindle is now ready to install custom hacks!
The file name that you reported does NOT contain "-3.2.1". It is also a very old version 5 jailbreak. The newest one is version 10:
https://www.mobileread.com/forums/showthread.php?t=88004
