1) perform a hard reset--this will wipe the phone, return it to factory state.
2) allow phone to reboot
3) when reboot is done, phone should prompt for the OTA update
if the issue happens again during the OTA update, then do these steps:
1)on your phone= direct your browser to
http://liveimage.htc.com/OTA_Supersonic_3.26.651.3-1.47.651.1_releaseu2cqjc2e98n4o6xn.zip
or download the file on your computer, connect the phone, & transfer the update.zip file
2) save the file to the root of your SD card
3)reboot to Options menu
4) apply update from .zip
5) allow Froyo to be applied
6) Reboot
this would negate the possibility that its a connectivity problem for transmitting the update since you're applying it from the sd card
Hope that helps!
update: saw some people saying that link wasn't working--in which case, go to HTC website for the official Froyo update .zip file