Try using the update it asks for, i.e. 3.21 or 3.30 from Recovery mode instead of 3.55. They can be picky about what will work (just that it wants to restore what was there before, instead of updating straight to 3.55 or such).
You might need to format your HDD to NTFS to get it to stop the loop and ask for you to insert the update on USB again.
Once you get it out of the loop, update to the OFW of any CFW you want and then finally the desired CFW, be sure to use recovery mode and select option 6 when updating to be safe. (for example: 3.21>3.55OFW>3.55Kmeaw all through recovery menu)
If you keep getting stuck in this loop, something is loose and not making a proper connection, normally the BR drive or wifi board etc.
oralphie: Will this allow chuck norris to play backups??? PLZ HELP!!!