First download the update from here:
www.nativeinstruments.de
A dialog will open asking you to save this file or open it.

Here you have two choices. This is a compressed file and therefore should be saved on the desktop or in a folder. This IS NOT the file you should place in the C: directory!!

Open the file: opens the compressed file to a temporary directory. Drag the file TraktorFS to your C: directory

Save the file: chooses any place to save this file. Save the file to any location. Open the zip folder and drag the folder TraktorFS to your C: directory

Reboot the machine.

Start with Final Scratch.

Close out of FS by pressing the X button in the upper right corner of the screen. This brings up a DOS style window with several choices. Choose Update Traktor FS. You should see the file that looks like this 112.tup
Press ok to install update.

After update is made, you will need to reboot your computer.