Hmm...

I suspect that your upgrade file may be bad.

I would recommend you re-download a fresh copy of the 2.0 developer final. Have the upgrader running and the player powered off. Power it on only when it tells you. (You will need to shut down hyperterminal first, just to make certain the port is free.)

In theory, the log seems to show that it is getting past that first "do you want to upgrade" section, and it looks like it is hitting a corrupt kernel. You only have a very short window for the upgrader to contact the player before the kernel tries to start loading. It may take a few tries to get that window to match. Let the upgrader ask you to power on the unit, and wait a second or two before plugging the player in.

The boot / upgrader is in a protected area of flash, so there should be no way it was overwritten accidentally. Technically, it could be a hardware problem, but I would think the odds of that happening are very low.