I too experienced this issue. My computer kept wanting to run the Display 1.2 firmware update. After the final and third time, it finally decided to reboot and run the EFI firmware update. With my clamshell open, connected to my monitor and it hung up right away with a 50% progress bar underneath the Apple logo. I read that a few users said the "extra" thunderbolt port was active and used an Apple Thunderbolt cable to get their display to work. I happen to have an Elgato Thunderbolt SSD drive that I was not using much because of its small size, and also noticed that all my ports on the monitor were still working. So I pulled my Elgato Thunderbolt cable and plugged that into my 15" MacBook Pro running 10.10.1. It's a workaround and it worked. Sound, USB, iPhone sync, photo sync, brightness all work. My display will work with a spare Thunderbolt cable. I then tracked down and manually downloaded the firmware to see if I could reinstall it. It won't and here is why. The main firmware # 26.2 matches but the installer only checks that number, it does not check the Micro Version number which will be incorrect if the firmware did not complete.
If you want to run the checker yourself here is where it is installed:
/System/Library/CoreServices/'Firmware Updates'/DisplayTBUpdate13/TBTUpdateCheckerX
Here is the output from mine:
Last login: Sun Dec 14 20:11:44 on ttys000
MB15:~ username$ /System/Library/CoreServices/Firmware\ Updates/DisplayTBUpdate13/TBTUpdateCheckerX ; exit;
2014-12-14 20:12:20.253 TBTUpdateCheckerX[2397:1604000] Host board-id = 'Mac-2BD1B31983FE1663'
2014-12-14 20:12:20.651 TBTUpdateCheckerX[2397:1604000] J59 at 'IOService:/AppleACPIPlatformExpert/PCI0@0/AppleACPIPCI/PEG1@1,1/IOPP/UPSB@0/IO PP/DSB0@0/IOPP/NHI0@0/AppleThunderboltHAL/AppleThunderboltNHIType2/IOThunderbolt Controller/IOThunderboltPort@5/IOThunderboltSwitchType2/IOThunderboltPort@3/IOTh underboltPort@3/IOThunderboltSwitchType1' with UID = 0x000100010033cdb0 (0x0)
2014-12-14 20:12:20.651 TBTUpdateCheckerX[2397:1604000] Switch already has a valid UID (0x000100010033cdb0)
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] UID did not need recovery
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] Found TBTD at route 0x3
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] Checking firmware version
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] TBTD ROM Version = 26.2
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] ROM Version base = 26; revision >= 2
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] TBTD Up Micro Version = 0x21
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] Firmware not up to date.
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] TBTD connected via non-tethered (Upstream Port # = 3)
2014-12-14 20:12:20.652 TBTUpdateCheckerX[2397:1604000] Error 0x7 occurred with route 3
2014-12-14 20:12:20.653 TBTUpdateCheckerX[2397:1604000] Cannot update because of error 0x7
I did notice some slight bending from repeated hookups on the Thunderbolt end. My biggest grip right now is using the hub Thunderbolt port to get my display to function. I did like having my Thunderbolt SSD hooked up there, but again I really wasn't using it.
I will have to my an appt. with the GeniusBar. Unfortunately I have 4 other issues to fix and I am sure I'll be there for a few hours or more.
Apple's engineering rational is probably this: The internal Thunderbolt cable was bad and it might cause problems with either the display or the computer, so lets disable the chip that is inside the cable. In response that train of thought, Apple should have done this with the design, the main power cable can be replaced. Why didn't Apple make a Thunderbolt and computer power bundle so that it can be replaced by the user like the main three prong power cable? Firmware updates have been proven can kill or disable a Thunderbolt cable and/or Thunderbolt port. Apple makes white cables that yellow or turn a dingy gray color and eventually wear out. I really wish they would adopt black rubberized cables that are heavy duty and reinforced to the guild. Think different and think of the new cables has patronage to Steve's mock turtle necks.
This update has killed dozens if not hundreds of perfectly good TB 27" D's. This firmware update needs to be recalled and Apple needs to publicly address this issue and promptly replace out parts or brand new monitors with the firmware already upgraded or ignore this buggy firmware all together.
Thunderbolt Display Gate is here. Steve Jobs would never ignore such a wide spread problem with their hardware and software. C'ON Man! Tim Cook. It's your turn to pay the piper. This update was supposed to fix black screens (of death), not cause them.