You need to get DiCE working before you connect it to the OBDII port, or indeed a DC source. The drivers should be present before Dice is connected. Once you connect DiCE, then the option to update the firmware becomes relevant. The update is from the net not the install media. I agree with other posters that first base is to completely uninstall all drivers related to DiCE before re-installation of drivers. I wouldn't use XP in VM. Windows 7 Pro or Ultimate with IE 9 is a great way to go. Provided the installation is done with Administrative rights things will go fine.
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