T-Mobile has a ROM upgrade for HTC HD2 (check here). I tried installing and ran into this error 260. After connecting my phone to my PC (which sync up using ActiveSync on my Windows XP machine), I started the installer that I downloaded from T-Mobile website. Then went through the setup steps. When the installation began, my phone screen changed to a tri-color screen. Then active sync showed ‘Not connected’. A few moments later, the RUU (ROM Upgrade Utility) stopped the installation and displayed the error 260 message and I had to exit out of the installer.
Turned out Windows was not recognizing my HTC HD2. So this was what I did and was able to upgrade my ROM. This might work for you as well.
1. Start the upgrade process and continue until you get the 260 error. Exit out of the installer.
2. DO NOT disconnect your phone.
3. On your PC, goto Control Panel. Open Add Hardware.
4. Go through the wizard and locate your phone (starts with Qualcomm) which should be displayed with an exclamation mark. Select it and click next.
5. Let windows automatically find and install the drivers for your phone.
6. Restart the installer that you downloaded from T-Mobile website. The upgrade will probably go through fine now.
This worked for me and might work for you as well. No guarantees whatsoever :).