My first Windows Phone 7 update has gone smoothly and my HTC HD7 is now updated and and waiting for the NoDo WP7 update to arrive.
Before you starting the update process, make sure that the Zune software is updated to the latest version. You can check for Zune updates by visiting Settings > Software > General > Check for Updates. If any updates appear, you need to update Zune first.
Next, ensure that your Windows PC is connected to the mains and that your Phone is fully charged.
Once you connect your Windows Phone device to your Windows computer, Zune software will spring to life and if an update is available for you you will be informed. You will also see a notification on your mobile device.
Once you click on Update Now, Zune will start the process of updating your phone and you will see a series of screens.
The expected time frame for the Windows Phone Update is around 30 minutes. Do not disconnect the phone while the update process is going on.
Once the update process is completed, you will be informed and you can then disconnect the phone.
Let me know how it goes for you!
These links may also interest you:
Troubleshoot: Windows Phone 7 software update problems
How to restore your Windows Phone 7 to an earlier version.