I recently tried to update one of our STSe KSU's to FP2. when i went in via CLI, entered maint> then U, it said command error. when i opened up the KSU this one was slightly different. i will post a pic to help... i am thinking that this ksu cant be upgraded to v2 because it is an earlier board and is missing the chips that are required to be able to update, am i correct in my assumption??

Most likely. Was it the original STS (non-e) which couldn't be upgraded? Part number 3500-00.

Easiest way to tell is the upgradable ones have a removable CIDU daughterboard on the main board, the non upgradable 3500-00s do not.