as stated in http://wiki.maemo.org/Community_SSU/Installation_FAQ (especially entry 1)

Q: I can't update, as I get the message: TO UPDATE YOUR DEVICE TO THIS VERSION OF THE OPERATING SYSTEM YOU MUST USE NOKIA PC SUITE ON YOUR PC. CONNECT THE DEVICE TO YOUR PC VIA A USB CABLE AND LAUNCH THE APPLICATION.
A: The message is misleading. In the majority of the cases, it is either needed to free up some disk space or fix some conflicts with other packages. Before taking any action, check the the Problems tab when viewing the package in the Hildon Application Manager (HAM).

viewing the package in ham means the very first click you make on the cssu package in ham there is a problems tab (might appear after few seconds)

edit: but since you are not even on pr 1.3 yet (20.2010.36-2 is pr 1.3) you have to revert the cssu installation and upgrade to 1.3 first
cssu on top of 1.2 (10.2010somehting) does not work properly.

The statement from Mike Fila about cssu includes latest firmware is not entirely true, it only contains the update from 1.3 to 1.3.1 but nothing from below 1.3.1

edit2: if you can hop on irc (irc.freenode.net #maemo-ssu) or if you don't have an irc client http://webchat.freenode.net/ (enter channel #maemo-ssu) I'll be happy to help you out