1. Download the update and rename the file update.zip
2. Connect your Nexus One to your PC/Mac and copy that file to your microSD card.
3. Power down your Nexus One. Then press ‘power’ and hold the trackball.
4. You’ll see a screen appear with three Android robots and you’ll see some code. Using the volume buttons, select ‘Bootloader’ and then press ‘Power’ to select.
5. On the next screen, select ‘Recovery’.
6. The Nexus One will reboot. You’ll see a triangle with and Android robot and an exclamation point.
7. Press the volume up button and the power button at the same time.( hold power button first, then volume up button )
8. Using the trackball, select “Apply sdcard: update.zip”.
After downloading the app, make sure it's named update.zip. You need to copy it to the top level of your microSD card.