Here's what to do:
1.open windows task manager by pressing ctrl-alt&del and click on the processes tab and end the ADB process.
2.now copy c:/sandiego/xolo/update.zip to c:/sandiego/tools
3.boot phone into fastboot and connect it to pc
4.go to c:/sandiego hold down shift and right mouse click on the tools folder and choose "open command windows here"
5.type: fastboot -i 0x8087 devices (to make sure the device is connected)
6.type: fastboot -i 0x8087 erase cache (wait till its finished)
7.type: fastboot -i 0x8087 flash update update.zip ( now it will flash the update)