Odin not allowing firmware to be flashed
The phone should be in Download mode:


Take out the battery
Plug into USB (apparently skip this if you have an i9000 -- see comments)
While holding both volume buttons (Note, you may need to hold Home+VolDown instead)


Insert the battery
Click the power button

Phone should go into Download mode after a few seconds:




You may need to disconnect from and reconnect it to the computer after this for Odin to see it.