Throw away the CD..
Assuming you have no BB software on your PC:
Download and install Desktop Manager from Here
Download and install the OS package as I described above.
Delete the vendor.xml file located in c:\program files\common files\research in motion\apploader
Plug in BB and open Desktop Manager.
Go to Backup/Restore and backup the device data.
When that is finished click on Application Loader.
It should read the software on the device and then in the window should show "Downgrade" for most of the device software.
Click Finish, Next or whatever the prompts say in order to finish the installation. Make sure you choose backup and restore all data. (The backup in the step above is just incase of a problem-an old habit of mine)