It worked for me. I recently got in on that $120 VW/Audi Phatbox deal. I got an upgrade to the USB 2.0 cradle, a 20GB DMS, and I also swapped out the older Keg board (rev A) with the newer Phatbox board (rev B). I did this because I liked the look of the Keg over the Phatbox. And now I have a whole spare Phatbox with all peripherals. Not too bad for $135.00 shipped!
Anyway, after swapping boards (putting the VW board in the Keg case) I just erased the new 20GB DMS and let PMM initialized it. I then went in to the firmware update section of PMM and set up the latest Kenwood firmware (don't skip that step). I then made sure my headunit was OFF, not just the ignition, I turned the headunit off and then turned off the ignition. When I plugged the FrankenVW/Keg box in, it updated the boards firmware without any problems.
The Keg works and plays fine. I have a KDC-X579 headunit. I can't say it will work on any other model, but I had no problems.