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I've been following the same exact steps. However, for the sake of completeness I re-downloaded the firmware update file from Amazon, kept it in root folder. I also don't have the update your Kindle greyed out. I'm able to select it and get a message of your software will update. However, when I press OK, the kindle just boots up/restarts. I don't see any updating Kindle screen.
Also for the past few days my Kindle randomly restarts
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