You can't use a USB key, it has to be a SD card - it will only look for updates in the SD slots.
Yes, you can strip the MIB2 folder out, but keep the file in the root directory (if you look there are 2 folders and a file, the file is the bit you need to keep)
Turns out you can actually use a USB key just fine. The soft button is labelled "Update USB/SD" and so I tried with a USB flash this morning and it starts updating normally. (Strangely, on my first attempt with an SD yesterday it seemed to work fine, then when it reached 100% an error popped up: "Error: Restart the software update"

Let's see if I succeed with the USB this time.
Also, as said before you can't strip any folder for MIB2 units or it fails, it needs all the contents of the zip file.