Ok, as expected my Padfone 1 got two OTA updates yesterday.
Everything was OK after the 1st update (still to Android 4.0.4), but the 2nd update did not succeed: it was downloaded and started, but after the 1st reboot I got the message shown on the left part of the image @ http://www.nikolsky.name/padfone.jpg .
Important notice: my Padfone1 is encrypted and I already had permanent rebooting problem with this some time ago due t encryption (was fixed in one of the latest 4.0 releases).
I tried to re-download and re-install the 4.1.1 update a 3 times, but every time I got the same error screen.
I performed factory reset of my phone and downloaded and installed the 2nd update again without encrypting the phone. It was successfully proceeded, but when I tried to encrypt the phone after this, the problems came back: my Padfone1 does not have any progress with encryption after a few % of encryption are passed (from 0 to 8%, typically 4-5%), I tried this 5 times and got this every time. The green line continues to "run", phone reacts to the volume keys and on/off button, but there were no progress with % of encryption even over 6 hours, as the longest example. I tried also to wait 0.5-3 hours for other attempts, but the % indicator was stopped too.
When I try to reboot the phone, I get the message in Chinese (please find it on the right side of the image mentioned above), the phone gets factory reset after this.
This looks like encryption conflicts with the new firmware release for Android 4.1.
I filed a ticket @ ASUS support, so let's see what happens...