I had exactly the same problem when I tried on Windows 7. I tried the .exe file with the same results as you and then tried to update through the Reader software with the same results. I figured it would be easier on Windows even though I use Xubuntu linux for my main desktop. Turns out it was easier and actually worked when I tried it on Linux! I used the wiki at
https://wiki.mobileread.com/wiki/PRST1_Firmware_Upgrade to upgrade and it worked flawlessly!
Gotta say though, this PRS-T1 is a piece of junk, I hate it. I lost my PRS-350 while walking and began using this one. Freezes, skips pages, and loads slow, super glitchy. I really miss my PRS-350.