Installing the desktop software doesn't help, because I keep getting error to connect to the device. I'm guessing that it is because my device hasn't completed the whole initial setup up yet.
Let me go through more details. Every time, I turn on the device, it goes straight to "Checking Updates" and initiate new software updates. When it failed, I have only one option, which is "Restart". After restarting, I got "Unable to download software update." with two options "Turn Off" and "Retry". Very ennoying, that I couldn't just skip it and do the update later.
I will click your "Accept as Solution" button, when I manage to pass this "Software Update" section. 
Thanks for the replies, I will keep trying.
I'm glad I am not the only one experiencing this problem. I had my playbook pre-ordered and arrived 2 days after the released. I was able to update the first update software and was loving the device until the new software came yesterday. I had exact problem as you have. I called the support people from blackberry and I was talking with them for hours but still they couldn't get it to update so they decided I have a defective device. I emmediately went to bestbuy to have them exchange me with a different one but to my dismay it does the same thing. Couldn't pass 50% update and keeps telling me to retry and restart. This time though with this new playbook I have no means of using any feature at all because it wasn't pass install yet and no skip either. It's very frustrating. I am so close in returning this back and wait after 6 months hoping playbook is ready by that time. Or if I can't wait maybe just get an ipad 2. lol! No seriously, I have been trying many many times updating this software but for no avail. Very very frustrating. I had to actually sign up for this forum so I can vent up. I hate to let my playbook go.
