Following up on the announcement of the over the air update for the Nexus One, there is now a manual procedure available for applying the update as follows:
-Rename the file to update.zip (in Windows, just rename to update – it is already a zip file)
-Make sure the update.zip file is on the root of your sdcard (not in any folders)
-To reboot into the bootloader, turn off the phone. Then power on while holding down the trackball.
Navigate to the option ‘recovery’
When the Android w/ caution logo pops up, hold down the power+volume up
Select ‘apply sdcard:update.zip’
The update is an inline update and will not affect device settings, applications or customizations made. Once the manual update is complete, the device will not prompt for an over the air update.