Can't back up data or update to new firmware!

My friend told me I should update my Samsung Galaxy S to the new 2.3 firmware.
So, I opened Samsung Kies and it told me I had to update to the latest version before I can update to the newest firmware.
After, I installed the newest version of Kies (Version: 2.0.1.11053_99_3), it automatically popped up with a message to update to the newest firmware.

It said to back-up my files before continuing and I tried every possible way.
I tried backing up with contacts, pictures, music, & videos. I also tried just contacts.
It ALWAYS says "Data backup cannot proceed due to an unexpected error ..."

When I try to skip the backup, another problem occurs and an error message says:
"Firmware Update has stopped working. Windows is trying to find a solution ... "

I've been going around forums and I already uninstalled & re-installed Samsung Kies, updated Windows, and restarted.

I don't know what else to do :| Can someone please help ?!
My phone's firmware is currently: 2.2 & laptop is Windows 7.

* ALSO, if I buy the new Samsung Galaxy S 2, will it have the same problem when I connect it to Samsung Kies?

I'm in the same boat. I've tried the update on Windows 7 Pro & Windows Vista Ultimate (both 32bit).

I had exactly the same problem. I solved it using the following steps.
1. Uninstall Kies from computer
2. Uninstall drivers from computer
3. Reinstall kies on computer
4. connect mobile to computer
this will re-install driver
5. Now go to kies / download and re-install latest firmware after backing up data
6. flash the firmware on mobile- ensure enough battery power is available and no interruption to the process