yesterday I updated my LG Optimus 7:
Zune sayed, that i was currently using the latest version (7008) of WP7.
I didn't want to install a VPN client and a dialup.
So i did it as described following:
1. Start Zune
2. Turn off Data connection and Wifi on the Phone
3. Connect the Phone with the PC (USB)
4. Start the update search in Zune
5. About 3 seconds later, disconnect your PC from the internet (Turn WLAN off).
6. Zune finds NoDo-Update. Press OK.
7. Connect to the internet again and install the update.
Should work for all devices that can be updated by the VPN / dialup solution.
If it fails at point 5, try other timepoints for disconnecting, or try it again disconnected.