I have already restored the phone back to factory setting but am able to get to recovery by holding down the power and up button but the only option is to load update.zip
Keep getting error E:failed to open /sdcard/update.zip (no such files or directory)
The s-on tool should be installed in HBOOT not in recovery. You need to name the file "PB31IMG.zip" without the quotes and boot into HBOOT and from there should work.
I would try to download it again every now and then a download wont work. Only other thing I can think of is you may need clockwork to be able to use it.