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according to this, you will want to back up your HDD to an external drive, and then format the drive that is in the system. If you don't back up your data, however, you will lose everything. It's an XMB error that is preventing the install, probably a hiccup from the last firmware upgrade.
Anyway, after you format your drive, install the firmware update. After the firmware update installs, retrieve your backup data. This is a very time consuming fix, though, unfortunately, but you gotta do what you gotta do, right?
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