That's kind of odd. I've flashed my N800 several times already (the result of failed attempts to boot from SDHC), and it's always been the following steps:

1. run software updater and click next until prompted to connect N800
2. switch off fully charged N800
3. connect N800 via USB to PC
4. power on N800 while holding down 'Home' key
5. watch for USB icon in top right hand corner, then release power button
6. back to software updater -- select version to update to, and proceed

I have never ever had to locate a Nokia software update folder. I've always run the software update wizard from the Start -> Programs. Why are you running it off the folder anyway?