You are doing it wrong. You just put the PS3UPDAT.PUP and the first lv2diag.self onto the root of your usb stick, Then put that usb stick into ps3 (must be right usb port - nearest to bluray drive - farthest to righthand side) then reboot while in service mode and it should give you a black screen for about 5-10minutes, green light will flash as proccess gets closer to the end, then it should shutdown by itself and its done. (if it doesnt shut down by itself give it about 20-30 minutes then reboot it manually)
P.S. The 2 lv2diag.self files are in the downgrade files rar that you must have downloaded when you followed all the procedures.
You can downgrade as far back as your hardware will allow.