Q: Update not successful???

Others are also reporting issues with this update.

You can try connecting it via USB to a computer with iTunes and updating from there - which seems to be working.

no, that's fine.  ATV 3 has usb port, your is Apple TV 2.

best to hold off with this update until it's fixed.

I was able to upate wirelessly, Ethernet would not work.

Same garbage here simply Will Not update,wired or wireless and as suggested elsewhere it has Nothing to do with Firewalls on routers,How do I know this ? because the firewall on my router is turned off.It downloads the update and it's when it's preparing the update it fails.Also will Now Not connect to yourtube as there's No content on YouTube ? Also won't connect to the store can't register etc etc what a brick atv3 really really is.As for going out and purchasing a USB for it Not a chance back in its box it's going for a full refund.Im Not building a house so I have No use for Bricks.

Get off VPN and you'll be fine. Worked for me.

Got it to update, 1st connect via Ethernet whilst connected with Ethernet also connect via wireless exit network settings.2nd plug out Ethernet without turning off the ATV3,3rd Now update.

Everything is now working including YouTube and photostream, still pure quality out of Apple for a fw update as a Apple customer I have come to expect far better.

Tried a few times with ethernet - same erros as above.  Configured AppleTV for wireless and update worked first time..........changed back to ethernet, restarted and all is well.

I am confirming that updating via wireless works without a hitch, whereas updating via Ethernet consistently fails. Simply disconnect your Ethernet cable, sign into your wireless network, and the update should work just fine.

Why this is all buggered up is beyond me.  Apple really needs to get back to a "just works" mode as the last couple of years have been challenging with all of the weird little "gotchas", but no official word from the company on how to fix these issues.