Yeah I believe he meant to say "stock recovery" rather than download mode, which isn't applicable in this case.
You do indeed hold Vol-Up + Power to boot into recovery. If you placed the manual update.zip file in the root of your EXTERNAL SD card (assuming you have one installed), you should be able to navigate to it with your Vol-Down/Up buttons after first selecting "install from SD card" from the first menu. Selecting it and hitting the Home button should start the install.
You may sit on the screen with the Android guy and a Exclamation Point for awhile before you see a progress bar. Just be patient with it. If the progress bar starts but something fails in the process, you either have a bad file download or there is something in your existing system files that the update doesn't like, which means the OTA would likely fail in that case as well.
I'd suggest downloading the file again and starting over. Then give the update what you would think is way too much time, then give it a little more time. If it still won't get through, there is likely something about your existing system that is not playing nice with the update. In that case, I'd suggest you backup all of your pictures, videos, files, and user application data, and do a factory reset/system restore. Then try again.