There are two separate firmware items in the logic sniffer: the code that runs in the PIC controller, and the "bitstream" that configures the FPGA.
I will note that the update "bundles" available from the Gadget factory (for example ols-0308.tgz) are very much out of date with respect to the OLS client. The "most recent" 0308 bundle was updated 6/8/2011 and has version 0.9.4 of "Jawi's" client (you want 0.9.6.1 or later). It does have PIC Firmware 3.0 and Verilog "demon" core 3.0.7 (aka "version7"), which may be the latest available. I actually went ahead and did the upgrate to the new firmware using the files in this bundle. This is absolutely critical to do.To upgrade the PIC firmware (from linux anyway), you must run as root and short the jumpers PGC and PCD to get the device into update mode (just doing the setup and reset thing did not do it). I did this, and then used the command line as follows:
./fw_update -vid 0x4d8 -pid 0xfc90 -e -w -v -ix OLSv1.firmware.v3.0.hex
Tom's Computer Info / tom@mmto.org