Can't update O2 HTC Desire

My O2 HTC Desire is teling me that there's an update (to Android 2.2) available but I can't get it to install.

It's called 'System Enancement 20.01 MB' and it seems to be coming from HTC rather than O2.

I cleared out apps and had >70MB free RAM and >1GB on the SD card, the download (on Wi-Fi) works fine, then the phone does a restart and the install starts, I see a green progress bar which stops at roughly 20%, then I see an image of the phone with a red warning triangle and an exclamation mark, the progress bar disappears and it just sits there doing nothing, I have to pull out the battery to restart at which stage it's forgotten about the upgrade.

Any suggestions?