I had the same problem with flashing blue lights with my LS-CHL. Mine started after I had people in the house doing work with the electricity. They turned it on and off continuously over the course of the day...
I could not make the LS-CHL boot to EM mode by pressing the Function key as instructed in the FAQ here.
I was however able to make it boot to EM using this method.
Now the firmware update worked up until it prompted me for a password.... its not the default password!!! Use the password that you changed it to before and you should be fine.
Even if you dont enter the password at the end of the update process, the update goes through. I could access the webadmin interface and look through the settings even when the updater was stuck on the password screen.
In short it was the disconnect power every 75 seconds thing that made it work again .... archaic...
/Mattias