2) Run SimpleDNS (you don't have to reboot despite the installer telling you to..), click on the Records button.
3) In the records window, click on Tools > Quick Domain Wizard
4) For domain name enter: ps3.update.playstation.net
For Web server IP enter 126.96.36.199, delete the Secondary DNS name entry, you do not need it.
5) Now that you have your new server added, you need to add A Name entries so the ps3 gets redirected on the firmware requests, to do this simply right click and choose New Host Address (A-Record).
6) We need to add two A-Name entries, depending on what region you are in. You can add as many as you'd like if you want to cover your bases though.
For the us, we need fus01.ps3.update.playstation.net and dus01.ps3.update.playstation.net
So, in the host address window, enter fus01.ps3.update.playstation.net for Record name, and 188.8.131.52 for IP Address, set the Time To Live to 999 days. Repeat this for dus01.ps3.update.playstation.net
7) your end result should be a setup similiar to this, once done simply close the records window in SimpleDNS so that it is back at the activity window
8) On your PlayStation 3, go into Internet settings and enter manual setup and set your PS3's DNS server entry for the IP of the PC on your LAN which is running SimpleDNS, then away you go!