Not that I've seen this kind of error messages yet, but all my Windows Phone 7 pre- and NoDo updates went painless so far, Microsoft has released a utility called "Windows Phone Support Tool" which is an application that fixes problems that prevent Windows Phone 7 devices from updating successfully. The tool only works for the following two error codes: "800705B4 - The timer ran out on what Microsoft's Zune Player tried to do" and "80180080 - Microsoft couldn't update the connected phone because the operating system might be corrupt". The support tool will install an update that fixes the above mentioned problems and allows to install the latest phone update by using the Zune after.
Windows Phone Support Tool is available from the Microsoft Download Center for both 32-bit and 64-bit system Windows Systems (but not for Mac OS - even if Microsoft offers with Windows Phone 7 Connector a tool to update Windows Phone 7 from Mac OS).
Again, I haven't read too much about failed Windows Phone 7 updates so for, nor have I faced it by myself. But in any case, it's good to know that there's a solution if something goes wrong.
Cheers ~ Arne