Ok, it seems like the system does not have enough space to install the update. Some users have solved this issue by removing their Gracenotes package. You can try this by following the guide here:
If you choose to remove Gracenotes and the installation will still not complete, you can try downgrading to 3.3 and then doing a full reformat and install to 3.4.20196.
Edit:
If you remove Gracenotes, the update succeeds, and you would like to re-install Gracenotes you can follow this guide: