Here's the steps that I usually use for upgrading the firmware on my Mitel 5340 IP Phone.
1. Download tftp (see below), and start
2. Open the phones browser interface, and in Network Config set the TFTP Server IP.
3. Save and reboot the phone
4. Copy the firmware files into a new directory, and change Current Directory option in tftp to this folder
5. Back in the phone browser interface, goto Firmware Update, down to Manual, select TFTP and hit Update. The phone will reboot and download all the updates.
6. Pray - do NOT power anything down, or cause any issues!
IMPORTANT: If you can, step through the upgrades one version at a time - do not JUMP to the latest version as this can corrupt the phone.
You may need to do a reset to defaults - to do this power up the phone while holding down the # key - this lets you into what would seem to be an engineering menu.
Note if you do a reset, remember to change the protocol back to SIP (if you are using SIP of course!).
Always backup your configuration before carrying out any upgrade.
Good TFTP Server for Windows: http://tftpd32.jounin.net
Final note: The latest v8 firmware does seem to a take a LONG time to initialise, but it does seem to get there eventually.