Boot Camp Assitant

Did you try updating the SMC firmware?
http://docs.info.apple.com/article.html?artnum=303880

I'm having this same problem.

I am having a similar problem except I have Boot ROM Version: MB31.008D.B00 & SMC Version: 1.24f2 and Boot Camp Assistant still says "Boot Camp Assistant cannot be used. You must update your system software before using this setup assistant."

I called AppleCare and after several hours on the phone over several different calls (the specialists on the phone were very patient with me & extremely helpful and called ME back several times to help see this problem through), we determined that my hard drive had not been formatted correctly. My original HD was in the format: 'Mac OS Extended' instead of what it should have been from the beginning: 'Mac OS Extended (Journaled)'. Boot Camp will only work on the 'Journaled' format.

After I had backed up everything via Time Machine to an external hard drive, I erased my whole hd and reformatted it as Mac OS Extended (Journaled). Then instead of going through the Boot Camp Assistant, the specialist led me through partitioning my drive via Disk Utility after rebooting from my Mac OS X install disk, then restored the OS X partition with my time machine back up (which worked like a charm). Then we formatted the other partition (for windows) to the 'MS DOS (FAT)' format, rebooted while holding the option key, inserted my Windows XP disc, and was able to successfully install XP on the 2nd partition. It runs great, though its still weird to see Windows on my Mac.

So if anyone is getting the same message as I was ("Boot Camp Assistant cannot be used. You must update your system software before using this setup assistant.") and you know your system is updated, Get Info on your HD and check the format to make sure it is 'Mac OS Extended (Journaled)'.

Hope that helps someone!