Peter,I had the same problem as well, only with a newer IOS version.  This occurred on Jan 2nd and I have not been able to find a cause as well.  I would welcome any thoughts on this as well.  This stack was installed 28 weeks ago and has had no prob...

Make sure that hyperterm is set at 9600. When I tried setting mine at 115000, I received the i/o error msg. Hope that works for you.

Austin,Just did this today due to the same prompt. I used hyperterm for the term emulation. I found the info in the 3750 Switch Software Configuration Guide - Recovering from Corrupted Software By Using the Xmodem Protocol. Very slow but went well...

I have had this problem when the firewall is blocking snmp as well as the above mentioned acl.