The update CD can not lock your hard drive if security has been disabled.
Thanks again Garrett.. That is the reassurance I needed.. I went ahead with the CD upgrade with the confidence that it wouldn't lock my drive somehow..
I burned a CD via Nero9's Data Burner (right within Start Smart)
Pioneer's instructions state:
"Please note that the CD you record must be in one of the following formats using Mode 1: ISO9660 level1/level2, Joliet, or Romeo."
While I didnt see any options to set a specific format using the app within Start Smart..
I went ahead and added the 6 files provided in the 09-01-0100.zip folder.. hit burn
Took the upgrade CD out to my AVIC Z3 and waited for the CD to fail 
After a few minutes of the AVIC trying to read the CD, I started to dig my torx8 out of the glove box, when to my surprise the upgrade started with no issues at all
20 minutes later I went out to check up on it the process.. the upgrade went through with no problems.. checked my system status and saw the 09-01-0100 db in place.. gooood stuff.. I was definitely pleased with the ease of the upgrade..
big thnx goes out to jwq for saving me some unnecessary hassle