- Removed 6GB+ stuff from the device: apps, videos, books, music
- Cleared 20GB free disk space at MacBook Pro
- Installed all Mac OS updates released AFTER iTunes update
- Try to update for umpteenth time
Pro tip: make sure you don't have any wake up alarms setup to tricker during update! It's e-x-t-r-e-m-e-l-y annoying to listen to the alarm, while not being able to shut it down. I had to skip Apple ID phase just to SHUT-THE-FC*K-UP clock alarm. Don't really care what did I screw up.
It was either that or introducing iPhone to my fine-tune hammer. Very close call (after all those hours wasted to fail with update).