How to Update the Nexus One to Android 2.2:

The latest Android OS version is available now and if you own a Nexus One, you must get it on your phone. Basically, taking in consideration the complaints of Android users using Android OS version 2.1, Google rushed to release its new version Android 2.2 update with bug fixes and which they named as Froyo. Till now, this update... is only available for the Nexus One if you receive the OTA version on your smartphone by luck as soon as possible as its a complete random process.
Before you begin, keep in mind that this procedure which I am going to explain is an official Android version 2.2 and it only works if you have a stock model of Nexus One, because this firmware update is posted on official Google servers and it will work even if you have the leaked copy of this update installed or if your phone is rooted. If you are looking for updating a rooted Nexus One, you will find it here.
Now lets start that How to Update the  Nexus One to Android 2.2 (Froyo):

1. First of all, Download the Froyo update.
2. Rename the file downloaded from above link to “update.zip” and then copy it in to the root folder of your microSD card. Then Turn off the phone.
3. After this, boot the Nexus One into the recovery mode by holding the trackball and pressing only once the Power button.
4. Then select the “Bootloader” and then the “Recovery” option.
5. Wait until the phone restarts (you should see a big exclamation point) and then press the “Volume up” and the “Power” button at the same time.
6. Then select “Apply sdcard:update.zip” using the trackball.
7. Hurray! You have managed to update the Nexus One to the latest Android OS version 2.2 (Froyo).

Troubleshooting:
If you get the “failed to open /sdcard/update.zip (No such file or directory)” error, make sure that the update file is named correctly. This may happen if you have an Windows option activated which hides files extensions.