I got a good email from zoom explaining how to update.
Here it is:
To update the system software, please do not put the SYSTEM.BIN file into the SYS folder.

Follow the procedure below to upgrade the system software version.
(Note: an SDHC card (4GB to 32GB) cannot be used for version-up.)

1) Unzip the downloaded file, then you will find the SYSTEM.BIN file.
2) Place it into the top directory of the SD card as below.
3) Then turn power on while holding down the [PLAY/PAUSE] key.
4 ) When the version up screen appears on the display, please select "OK" to perform the version-up.

If the problem still remains....
Please use another SD card or format the currently used card.

Sincerely yours,
ZOOM Corporation.