Now by no means should it be so diffucult to get an OTA update to install, there certainly is an issue but I got it to work finally after hours of web surfing, forum reading and failed attempts. My Market now even says "Verizon" not "Sprint"!! I found most of these directions from user giskard from androidcentral forums
First thing I did was to download app2sd from the market, move all apps to SD that will. Next I used the app to delete all cache from all of my applications (Nice Feature). I then deleted the top few apps with the largest file size (Now I know you may have plenty of room accoridng to phone, but this is necessary due to the bug in 4.06 release plus if its free ones you can just re-download anyway)
Then booted into HBOOT and deleted all cache from the phone (this does not delete any files/settings off of your phone) directions are from user giskard from androidcentral forums
- Boot into recovery
- Press and hold Power, Choose "Restart" option
- When screen turns off, press and hold Volume Down and Power
- When the white HBOOT screen appears, use the volume button to move down to “RECOVERY.”
- Press the Power button to select “RECOVERY.”
- When the triangle and exclamation appears, hold the Volume Up and Power button at the same time.
- Using the volume button, scroll down to “Wipe cache partition” and select it.
- Select "Reboot system now"
After the phone comes back up go into your phone dialer and checkin with google and dial *#*#2432546#*#* the numbers will dissapear it means it worked.
Next I went into Settings - Date&Time uncheck use automatic provided values and set the date to one month in future (by default your phone checks every 14 days for an update from what I read, this forces it to check again). Go back to settings and about phone and then system updates, it may say you are up to date, close out, give it another moment then go back, it eventually prompted again for the update.
This may seem all convaluted, which it certainly is, but this was only way and order of doing things that I could get my phone up to 4.08. I hope this works for somebody else, but it definetly worked for me and others with our same issue. If somethjing breaks while you try this I am not responsibile.
Just sharing what worked for me. Good Luck!