OK i am a little confused i guess =P
I did the fix, made sure i did it right like 5 times over but i must be doing something wrong as once i got to run the game i get (must update to 3.50) Now i know i edited the .sfo as i checked it like 50 times to make sure BUT still the same error.
the steps i did.
1. placed the update .pkg on memory stick then in PS3 "Installed Update by going to Install Package Files"
2. FTP'ed game to GAMEZ folder "Re-placed Eboot.bin and edited .sfo file"
3. Tried to play game "I tried Gaia Manager and Open Manager with every settings i could think of"