"n dl" is not an option, it's a status display.
You got as far as step 5. Press the OK/SELECT on the DVR to begin authorization & downloading of software, STB/DVR firmware from your cable headend. It could take up to 20 minutes to download the firmware, the software could take up to 2 hours depending on what software your cable provider has. You should see "n dl" in the LED display with a line moving in a square.
The cable card is authorized since you're able to see content, but the software download failed because the 3416 is not in VZ's equipment list and the head end doesn't know what to do with it.
From what I can determine, Comcast and Cox use that model. Not Verizon.