What should you do: http://wiki.maemo.org/Updating_the_tablet_firmware
Can you backup the phone?: Its a little too late to use the normal methods. If you insist, there is a thread floating around somewhere on talk.maemo.org with one installing backupmenu when the device is semi-bricked. If you don't have backupmenu installed, it'll be challenging. If you do, its as simple as going into backupmenu to dump the rootfs contents into eMMC/microSD/etc.