I could fix the firmware update problem by doing the following:

1. Upgrading to latest SqueezeCenter 7 nightly release (March 01,
2008).
2. Restarting the SB3 (power off, power on) and configuring "automated
firmware update" (or something like that) in the setup, i.e. let the
SqueezeBox automatically update the firmware without confirmation or
user intervention.


PS: I also tried to press and hold "1" on the remote while powering
up/starting the SqueezeBox. Don't know though whether that affected the
outcome or not.


-- 
MGN
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