I had the same problem but I fixed it (http://www.ps3news.com/forums/ps3-he...lp-120350.html). You can also fix it by taking out the HDD before the update begins, it will show you an error code at around 20%, it will start a countdown, wait for that to finish (leave the HDD out).
The PS3 will "restart" and ask you if you want to restart the PS3 or install the firmware on a USB by pressing "Select + Start" (make sure you have the update file in the right directory on the USB and it's plugged in first). Put your HDD back in and press "Select + Start", you can either try installing a CFW that doesn't check for a BD drive* or cancel it so you can get kicked back to the XMB.
*You can make your own CFW that doesn't check the BD drive by using MFW builder (http://www.ps3news.com/ps3-cfw-mfw/p...e-is-released/) like TheShroomster mentioned.