1: If you have a personal computer with Broadband Internet connection then go to Internet Explorer or Mozilla Firefox, I mean your default browser and in the URL box paste or write down the following web address and click ENTER.
2: From the SUPPORT segment, choose OS UPGRADE and LG Mobile Support Tool.
3: When LG Mobile Support Tool dialog box pops up, go to OPTIONS and HELP.
4: Click on this and you will find COUNTRY and LANGUAGE. Select the country you live in and also select the main language used over there.
5: In the same dialog box you will get another option named INSTALL USB DRIVERS. If you have not installed them already in your PC, then immediately install them because without them you can not do anything.
6: Then click on HELP from the OPTIONS and HELP, now you will see a big page infront of you with a "SEARCH" option. Just click on it and you will see a table of contents explaining how to upgrade the OS of your phone.
7: In the 4th column you will see the procedure of LG GT540 OS UPGRADATION PROCEDURE which was announced on 17/09/2010.
8: Now just blindly follow the instructions written there. Your phone firmware will be soon upgraded from 1.6 to 2.1 without any hassle. It will take some 1 hour and 10-15 minutes to complete the process.
N.B. Keep your phone connected via USB data cable provided with you with the phone in the sales package and please do not become impatient to disconnect it or to take out the battery or to use the phone in any means. Another tip, before doing this charge the battery of this phone fully because the process might consume a lot of battery power, if it drains in the middle, there might cause some serious and severe damage to the phone itself. So be cautious. One more thing, while installing the USB drivers, keep your phone disconnected from your PC.
There is no need to drop in your nearest LG SERVICE CENTRE. At your home in your convenient time slot you can do this and believe me you need not be a tech-savvy person. Just after doing so you can back up your applications from ASTRO FILE MANAGER which will be required to re-install from the Android Market. Believe me friends, you will find it much easier and there will be no such problems as we have been discussing with in this thread and, moreover, LG OPTIMUS GT540 will be a new smart phone again.