BINGO! Finally got the phone part to update. I did three things and one of those three must have done it. (I tried about 10 times before it finally got past the phone part.)

I did a *228 option 2, unplugged the desktop I was using from the network, and removed the microSD card. Somebody had mentioned removing the SD card earlier so I don't know if that is what finally got it to work, but if so, thanks!

The phone version now follows the new software version..

S/W Version
Old 6.0 PDA: i760.07 V.AH08.17233
New 6.1 PDA:i760.07 V.BD14.19202
Old 6.0 Phone: V.AH08
New 6.1 Phone: V.BD14
Old 6.0 Eboot 1.00
New 6.1 Eboot 2.00

The phone part is the one to check, the device can get the software update to 6.1 without the phone getting an update.