I was having the same problem. I was on JL2 trying to get on KC1 and everytime I attempted to perform the firmware update I would get the dreaded "updated failed" error message, with the description "phone was disconnected". I read all the posts on this forum and XDA, and I tried everything, but nothing really worked... I even turned off my phone, removed the SD card, and did the update but to no avail.
Now, I have been using LauncherPro for a while and I know there are problems connecting the phone to Kies when using LauncherPro, but I foolishly thought this problem was solved when I was able to connect my phone to the new version of Kies with LauncherPro running. I was even able to read stuff off the phone via Kies. Anyhow, even though I had LauncherPro installed I did not set it as my default Launcher so I have the choice to choose, especially in situations like this. I tried switching to the pre-installed TwLauncher app (by pressing the home key and selecting TwLauncher - make sure the "always use action" option is unchecked) when running the update, but still nothing. In the end I had to completely uninstall LauncherPro and then perform the update, and then everything worked... I noticed that my phone even connected to Kies faster (before I had to wait ~30secs).
Hope this helps a few people.. this could have definitely saved me a few hours over the last few days, but I guess that's half the fun in owning an Android phone