Do you need to have the firmware on a USB in order to get the new, blank hard drive to install, or will it seek that out once you get started?
Also, does the drive need to be empty when you start up? The PS3 will only recognize FAT32 partitions connected by the USB ports, while many Windows (XP and newer) default to NTFS partitions.
The old hard drive won't work because of the ps3 formatting and it getting hung up with conflicting information from new update.
Can I take the hard drive out of my old one and attach it to the slimline one, whilst leaving the slim lines hard drive in place, to double up on storage?
This document, titled "How To Install a PS3 Update Via a USB Key," is available under the Creative Commons license.