Follow these instructions exactly and you should be able to have OS 4.x working.
1.) BACK UP YOUR DATA! - I can’t stress how important it is to get a good backup in the event you need to restore your data.
2.) Verify that you are using the latest version of Desktop Manager. Open BlackBerry Desktop Manager. In the Desktop manager program on your PC use the Help menu and select About Desktop Manager. If you need the latest version follow this link.
3.) If you haven’t already, download lastest OS 4.x from this link or if available from your carrier its BEST to download here (select carrier)
4.) Install 4.x using the .exe file you just downloaded. If you are downloading the OS specific for your carrier you can skip step 5. I other words if upgrading a T-Mobile BlackBerry with T-Mobile OS then you can skip this step. However, if you have an At&T Wireless Blackberry and the OS is non-At&T eg. from Vodafone, you MUST follow step 5.
5.) Delete the ‘Vendor.xml’ file ( C:\Program Files\Common Files\Research In Motion\AppLoader ) Or search your computer’s hard drive for the “vendor.xml” file. Once you find it, delete it.
6.) Connect the BlackBerry device to the computer. If prompted, type your BlackBerry device password and click OK.
7.) Open Desktop Manager. It should recognize that there is an upgrade for your device. (’Vendor.xml‘ must be deleted for this step to work).
When the Application Loader Wizard is finished examining the configuration on the BlackBerry device, the Device Application Selection screen appears listing the applications and OS version available for installation. The selected check boxes indicate applications that are already installed on the BlackBerry device.
9) If you didn’t backup first you should select to do so now.
10) Follow the prompts and you will have OS 4.x installed in about 15 to 20 minutes.
No credit goes to me for this tutorial its all Twheeler's work.