The highly anticipated iPhone update to OS4 encountered a lot of issues users of the 3G phone.  It appears that 3G users can’t follow the prompts as directed but instead have to take an alternate route.

1. Backup your iPhone first; this is always a given and you may even want to make a copy of the backup to a USB stick
2. Select the Restore button instead of the Update button; yes Restore is the way to actually get the update pushed to your phone
3. Typically after about 20-30 minutes your phone is updated

Many users reported waiting hours to get their phone to update.  Some users waited over a day and the update still would not install but instead remain stuck or stalled at the backup stage.