Decided I should try upgrading from version 3.50 today.
As nctnico has already mentioned the built in upgrade tool only wants to read from the Magneto Optical drive. He used a hex editor to change the path so he could read the upgrade files from a USB drive. My scope has no USB ports so I tried something else.
I unpacked the 4_3_upg upgrade package on my desktop and copied the files directly to the scopes hard drive. I then booted the scope, killed the scope app and used explorer to copy the files to c:\scope\upgrade\scope\temp\
Once the files are copied you can run HP548UPG.exe directly from that directory and it will perform the upgrade.
With version 4.3 running I removed all of the files from the upgrade directory and repeated the process with the 4.5 update.
It was a pretty hassle free way to upgrade the scope. Going from version 3.5 to 4.3 easily doubles the boot time of the scope(3.5 direct to 4.5 might not as it will skip the web features). I suppose that is the tradeoff for adding the built in webserver with webcontrol. If nothing else it makes it easy to grab screen shots.