Went in to a different dealer today, and let them try the update. They also couldn't get it to update, and were then confused when their diagnostic of the key fob was missing some key "Integration Level" data that is there for all other cars. Lead Tech will escalate as he has no clue what it's doing. For reference, my car is running 001.020.022. The update brings it to 1.23.4.
Quick google highlights 5 series and 7 series owners with the same current version (001.020.022) are unable to upgrade as well - with the same error message.