Yes I Can!

HOW-TO UPDATE TO ANDROID 2.2.1 ON NEXUS ONE

Now you can either wait for the OTA update to arrive itself, or you can be a geek and install it manually by following the steps mentioned below:
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Step 1: Download Android 2.2.1 from Google here (direct link)

Step 2: Rename the file to “update.zip” and move it to your Nexus One’s microSD card.

Step 3: Turn off your N1.

Step 4: Keep the “Volume Down” button pressed and turn on the phone. Scroll down to recovery and press the power button.

Step 5: When you see a triangle with an exclamation mark, simultaneously press the Power and Volume Down buttons. A menu will appear, select Apply sdcard:update.zip

Step 6: Now the screen will say install from sdcard complete. Select reboot system now and leave the phone for a while. It will take considerable time rebooting and updating to 2.2.1 firmware.