OK, I had the very same problem. My iPhone got iFried and wouldn't restore.
fortunately the doc did come in handy. For me none of the solutions listed in this page worked
http://docs.info.apple.com/article.html?artnum=307007
except for the last one where you try restoring the iPhone on a different machine. I had a Vista Home Prof box. I installed iTunes on that machine and connected up my ipod and everything worked fine and I was now on 1.1.3 . I connected the iPhone to the original machine I was having problems on (a toshiba running xp pro) and it restored my data.
If you are stuck and have tried everthing, I suggest you start on a clean machine reinstall iTunes and connect the iPhone for updating. If everything goes well, you can get the data back from the original machine...
Hope this helps..
Santy