I was having the same exact problem trying to go from 1.05 to 1.07. I don't know why 1.05 would update and 1.07 wouldn't but after reading a bunch of posts here and trying what they said...
Here's what worked in my case:
First I downloaded aspichk.exe and found that my ASPI layer was not up to date.
Then I updated my ASPI files using a hack called ForceACPIv1.7 since I didn't have any Adaptec products installed on my machine (although I do own a sccsi card) (if you have one of their products you can use adaptec's updater instead "aspi32.exe" found on their site).
After running ForceASPI as instructed
here, I rebooted and suddenly the firmware upgrade flashed perfectly!! Now I finally have 1.07.
Upon restarting a second time windows informs me that my ASPI is older than the version installed by windows98se and that I can go to setup to fix it. However, since the adaptec aspi's are actually newer versions I chose to ignore this. I have also heard that some burning software requires the newer aspi layer. So we'll see if this causes me problems or helps me later. P.S. I'm not sure if this is an illegal program or what but I think TDK or Microsoft owes us a similar fix.