Connect your USB flash drive to a USB port on your computer.
Click here to begin downloading the update folder. Save it as "$SystemUpdate_Fall08_7371.zip" anywhere on your computer.
Unzip the File.
Copy the contents from the unzipped folder onto the root of your flash drive.
Safely remove the flash drive from your computer and plug it into a USB port on your Xbox 360 console. If your console is on, turn it off, then back on. The update program will start automatically.
Select Yes, update now. When you see the new dashboard, you're done.