Basically, the firmware which you have downloaded to your Win7 machine somehow has to be in the router itself and to run from there.
To update firmware, steps are:
1. Download to your PC (you have done that!)
2. Make your PC talk to the router ( you haven't shown us you did that!)
3. From the router (thru web interface), you tell the router to take the firmware (on your PC) to upgrade its firmware.
4. Wait let the router reboot.
5. Log in the router again (thru web) to configure the router.
steps 2 to 5 are not that difficult and all should be explained in details in the manual. So you need to read it!
If you don't have the manual , download it from Buffalo website.
Note that your PC and your router may need directly connected to make firmware updating easier.
Good luck.