Here are the steps I used to manually install FroYo (EPE54B to FRF85) on my AT&T bound Nexus One:
- Download the update from Google's server.
- Move the archive to the root of the SD card, rename it: update.zip
- Shutdown the phone by holding down the power button, and then selecting Power-off. Wait for the phone to shutdown.
- Hold the volume - button and press the power button together, wait for the white boot screen.
- Select Recovery using the volume up and down buttons and then press the power button.
- As soon as the Android robot holding a sign with an exclamation point is displayed, press volume +, volume - and the power buttons together.
- Select apply sdcard:update.zip with the trackball, and press the trackball.
- Select reboot system now when the update is done.
That's it. Pretty straight forward.