Well...
As a happy and seemless user or the 3.x software, by installation process was completely crazy. I tried upgrading through the zune software, windows update, and the stand-alone software from Zune.net
All failed completely right after I accepted the EULA. it was always the same. The only time I got a different error code is when I disabled my firewall and antivirus. But still not success.
I followed all of the help links and searched the zune forums to no avail. Finally I had to complete clean OS install to get it to work. I suppose I could have used system restore, but I'm not even sure what version to go back to.
Not sure if it was the Zune software or my OS got corrupted somehow. But its installed now and loading all of my music.
I suppose alls well that ends well. I guess...