I believe you did nothing wrong with the router. The router itself did not download the wrong firmware image. Here's what I got from Linksys:
"This is a feature of the router. All DNS queries are handled by the router. The router will use static DNS servers that are entered into the router UI but will only pass the IP address of the router to the DHCP client.
This allows proper handling of the www.linksyssmartwifi.com URL to point to the router UI rather than the Linksys Smart Wifi cloud.
This applies to both external DNS servers such as openDNS and internal DNS servers the user may create."
Hope that clears out everything.