USB HOST CABLE
FAT32 USB THUMB DRIVE
1) Place the update.zip (can have any filename you like) on the usb stick.
2) Connect the USB stick to the host cable and connect the host cable to the Xoom.
3) Power off
4) Power on, tap (ONLY TAP) volume down a few times until you get a list of options you can cycle through.
5) Select Android Recovery
6) Tap Volume up to boot into recovery
7) Hold power and tap volume up at the green android screen to get the BLUE recovery menu
8) Select apply update from USB drive
9) Select your update.zip from the menu... enjoy!
As for the 3.1 Update, if you get into a boot loop, just hold power and volume up to get out of it.
WIFI ONLY USERS:
There is no menu option for android recovery, you'll need to use:
adb reboot recovery
you can plug in the usb stick at the green android guy screen