Did you rename the hldsupdatetool to something else? That's what it looks like it is choking on. If you did rename it, rename it back and try again. If you don't have the original tool redownload it <a href='ftp://hlserver:hlserver@ftp.valvesoftware.com/win32/hlds_updatetool.exe' target='_blank'>HERE.</a>
I've seen references to this in other places. It seems it downloads the updated hldsupdatetool.exe but names it as hldsupdatetoolnew.exe and is telling you that you need to rename it to hldsupdatetool.exe and rerun it, so it's actually using the new updated hldsupdatetool file and can continue to update your hlds.
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