Thanks for the reply. It's weird because I did another one and didn't have that problem. Plus I can't find anything not being able to run the 4.1 update. Seems like all the problems are either before or after that step.
Not sure if it matters, but I DO NOT have internet setup on the wii... I did a friends wii a month ago using the OLD setup and didn't run into any problems, but I don't think the new instructions work or they forgot to mention that you need internet access?
IOS60-patched.zip and 4.1U-RVL-WiiSystemmenu-v449.wad.
Extract both to sd:\wads.
Load HBC, run wad manager using IOS249.
Install ios 60 first,
then install systemmenu 4.1u
If you already have the ios60patched installed then just run the 4.1systemmenu.wad
Then you'll be able to install Priiloader and finish the 4.1 guide starting at step 5. A link is below in my signature.
(Props to Mauifrog for the links)