I just did the upgrade. I write software for a living so I consider myself relatively good at such stuff. I got many many device restart errors. I used a USB cable. Suddenly, and I don't know why this time it worked versus others, after pushing the master on/off button and retrying the update, it worked. Pretty nerve-racking and agree that the software definitely needs to be more reliable. Maybe this time around I pushed the master on/off faster than before, who knows. I don't know if that could even make a difference.
I also just ran the auto-setup. I can guarantee my microphone is in the same exact position as before and the room has not changed. I too am getting the fronts-small surrounds-large error. Pretty annoying when a firmware updated introduces new issues.
Maybe Outlaw will make another firmware update to fix this issue. The auto-setup feature was something I really liked and was even a selling-point to me for the 990, now it's useless.