YES! i have found the solution. i just registered to share it to anyone with the same problem. i spend HOURS and HOURS, literally sweat and frustation like i've never experienced before to update this POS. i was ready to smash my one week old Nexus 7.
the solution is so simple and stupid that i want to smash my forehead on my keyboard.
i was using this video as a guide to manually update the N7 youtube /watch?v=iQhyerPfGes
what it doesn't say is that you DON'T HAVE TO UNZIP THE FIRMWARE!!!
You have to issue the command from the platform-tools folder (or the directory in which adb.exe resides). Right-click n the folder window and choose "open command prompt here." Then type
adb sideload 094f6629314a.signed-nakasi-JOP40C-from-JZO54K.094f6629.zip
remember, don't unzip the firmware
my Nexus 7 still doesn't finish the update because it say something about an error, but that's another problem
but at least i'm not getting "cannot read sideload" anymore