I am a bit intrigued as to how diagnostic software would fry a board. I've only heard of hardware problems causing this (shorts, overheating, etc.) but I wouldn't put it past M$ to create something so incredibly borken.
The update didn't take and she called Micro$oft. The tech had her run some diagnostics. The unit RROD'd then. My guess is the diagnostics helped overheat the MB/Video card, but that's only a guess. I've not had an issue with our XBox, and I have 4+ kids on it (But mine is less than a year old and supposedly Micro$oft fixed the overheating problem on these. Time will tell)