Please Help with upgrading gamma 0.3 for err 002

Hi everyone,
I could use some general advice on how best to upgrade my WII, I currenlty have 3.2E installed with wii backuplauncher gator 0.3, This is running from IOS 249 also with starfall installed.
I done this back when the wii was 1st softmodded to play your backup games.
We got my daughter the WII sports resort for her birthday and now i have the 002 error, so i guess its time to update.
I have a gamecube controller so I can now do a nand flash backup incase everything goes south...

I need advice please...
what is the best way to go about upgrading?.
Should i make my WII a virgin WII again?
Should I go with USB?(disks last like 2 weeks in this house:P)
Is there any tutorials to go from my current setup to an update that wont give me the 002 error?

Any advice would be greatly welcome...(All I hear from the kids just now is,)
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
CAN WE PLAY SPORTS RESORT
ARE WE THERE YET.....
ARE WE THERE YET.....ARE WE THERE YET.....ARE WE THERE YET.....ARE WE THERE YET.....ARE WE THERE YET.....ARE WE THERE YET.....

Thanks guys...

BR
Phezo