Ahh, that box! Would be nice if you could up a pic of the sticker for all to see
I do know that some (only in theory, never practice) 60gb units only work above 2.00 or so - it does not explain why you were able to install 1.00 however.
But, older boxes and card readers did not go over too well, best bet is to do it off a USB flash disk (as you sort of did)
Furthermore, every PS3 TEST is made in Japan - the way Sony keeps things more secure, than making them in china.
BUT, which other 1.x firmwares did you try installing? If I recall, the 1.60 listed here on the site is actually a PS3 TOOL firmware, so if you got it from the site, and tried to install - you may have gotten that error.