Well it seems Kobo is not content with selling sub-par, flawed hardware.  Now their software guys are stepping down their game.  Well most e-Readers consider their reason for existence to allow you to save and read your books, Kobo seems to think the ‘save’ part is optional:

Slashdot: Kobo Customers Losing Books After Software Upgrade

You should probably backup your library and avoid the upgrade until this gets sorted out.  Caveat Emptor