I want to update to 1.3. I am assuming that the "MAEMO 5 20.2010.36.2" update that is available in the App Installer has something to do with this 1.3 upgrade, am I correct?

Anyway, the N900 is telling me that I have to use the PC Suite mode to do this, and the PC Suite application insists that I back up my entire 30 GB of data because it will all be wiped!

WTH!?! Can't I just flash to 1.3 and get the same results? It seems like the PC Suite is taking the long way of doing this. Can someone help me to understand this better? Thanks.

You can do an OTA upgrade if you remove the incompatible packages it has problems with. It's most likely to be libgles1 used by at least one game, you can check this by looking at the update details within application manager though, which will tell you what packages are conflicting.
Alternatively, you can just flash the firmware using flasher, and data on your emmc will be fine.

Or just use fapman which will also update OTA even when 'conflicting' packages are installed. This worked perfectly at my device. No loss of data.

What is OTA, anyway?

Also, I haven't mentioned any "incompatible packages", as well, are you sure you're replying to the correct post?

But, to reiterate, can I use the flasher to accomplish this "MAEMO 5 20.2010.36.2 update"? Is this the same thing as the "1.3 update"?

Over The Air, e.g. an update on the fly without flashing or using some bloated app like PC Suite.
How do you know? When using HAM (hildo application manager) and it tells you to use PC Suite this indicates that there are incompatible pakets installed. HAM should offer a tab where it lists these packets.
Yes. Yes.

Good luck!

just used "faster app manager" worked perfectly, thanks x-lette