guys.. Thanks a lot! Maemo community rocks. when I tried to update first, it said "connect to PC & update". I solved it. then it says "not enough memory". I solved it too with the help of the community.
The best thing to solve the memory problem is to go to xterminal and then type df -h and see how much free space you have in rootfs. I suggest to have atleast 45mb. Keep uninstalling unnecessary apps to get 45 mb. Thanks again!