Am I missing something or does this update NOT use an installer script? With past updates, I would just burn the iso and boot from it. 3.7 boots to a system but then complains that the img is too old and gives me an OK button to reboot.
Manual update of files then?
You are failing to boot it from the CD if it complains about too old boot.img. It's loading old boot.img from the HD in that case.
If you're using a Mac, try booting with alt-key pressed and select the CD from the menu which is shown. Or if you were trying to boot with C key pressed, maybe connect keyboard directly to machine without hub.