for Shrink to work you have to first convert the mpg to dvd format. try DivXtoDVD in software section at top of page. once you've converted you then just point Shrink at the video_ts folder created by DivXtoDVD. (make sure you have target size set to 4300MB in Shrink's preferences btw)
as to firmware the important things are that you must not reset the PC whilst firmware is updating as it can toast the drive. nor powering off during update (cross fingers and hope for no power cuts!). make sure no disc is is the actual burner when you update it (don't know why exactly but i heed the warning and that's good enough for me). and the obvious thing is to be sure what's involved - ie can it be done in windows, do you need a boot floppy, etc etc
