It was indeed a horrible upgrade experience and it really blows my mind how Samsung can create such a great phone and so horrible Windows-software. If you want to give it another try, I covered how I got it working in this thread over at reddit:

http://www.reddit.com/r/Android/comments/dscb6/samsung_galax...

Basically: Downgrade to a specific version of Kies not containing the buggy FW updater. Upgrade your phone. The upgrade to 2.2 is definitely worth it.