- Download the latest CyanogenMod (Current Stable Version) from this site.
- Download the latest EBI1/32A Kernel from the same page.
- Copy both .zip files to your SD and reboot in Recovery Mode (press Home+Power at the same time or fastboot into your recovery)
- Apply Zip: update-cm-xxxx-signed.zip
- Apply Kernel Port Zip: rad-4.xxxx.zip or bc-4.xxxx.zip (depends on who released the latest port: rad - Radix999,bc - bcrook )
- Wait. For a long time. =) Seriously, this will take ages to boot after an upgrade.
Ok, so what if you don't have an option to apply this zip in the recovery? If your phone only gives you the option to "apply update.zip" then you don't have the fancy recovery ROM. Download it from here (scroll down and choose the "H" version), and get the fastboot binary from here. Copy both into your android sdk "tools" directory.
Now, power down your phone, plug it into your computer via USB and press the Back and Power buttons at the same time. This should bring you to the fastboot screen. On your computer, cd into the android sdk tools directory, and type "fastboot boot ./recovery-RA-sapphire-vX.XX.zip". This will reboot the phone into the fancified recovery screen, which should let you update to any chosen zip file.
Oh, and note that this will not wipe your data!!! If you perform these steps completely and nothing goes wrong, all your apps and preferences will remain as they were. Of course, I can't guarantee anything. =) The only time you would wipe your phone is if you applied a full firmware upgrade (DRC83 in the filename, usually.) If you're unsure though, just leave a comment & I'll try to help! Or you could checkout the forums associated with some of the links above.