Inovelli makes it tricky to get a direct link to the download from their site; I found it easiest to begin downloading the file in my browser, then use the "Copy download URL" feature from its download manager to get the direct link to the file. Or you could save yourself that effort and use the links Bryan helpfully figured out for us in post 232. 
(But that's the idea in case another manufacturer does something similar or you need to do the same thing again, say, when Inovelli releases the final version or future updates.)
What you have won't work because it needs to be a URL the hub can access, as that is where the path will be resolved from. The file:/// URL will only work on the computer/browser you're using to view the device page, so it won't work here. If you did want to do this locally for some reason (I'd just use the direct links above since they already exist), you'd have to spin up a local web server or somewhere to host the file that your hub can also get to; this is what he meant with the "Web server hosted OTZ or HEX update file" requirement. Hope this helps explain it! (Not sure if he could add something to the tool to detect this kind of error.)
