I paid for and downloaded the 2.0 update and when trying to update or restore, it says, "The iPhone 'iPhone' could not be restored. An unknown error occurred (5)" This is an ipod touch and not an iphone. I have tried uninstalling and reinstalling iTunes. Tried different USB ports. Unplugged all unnecessary USB devices. I am able to put the ipod in restore mode but get the same message. I have also been able to revert to 1.1.4 and tried again but still getting the same thing. Apple support was no help at all. I got to their "Second Level Support" and she was no help either.
I have the exact same issue. However, Even tho I finally managed to restore to 1.1.4 and I was usually getting the (1602) or (1604) error when I tried updating on my home PC. Now I'm getting the (5) error on my work PC. I have no Idea what is going on.
This issue might have to be resolved in a newer update release.
I'm having the same problem. I insatlled iTunes 7.7.043, then purchased the version 2 update. I'm now stuck in a loop. First the unknown error 9, then the 'cannot connect to iPhone error', then the message 'detected an iPod in recovery mode - you must restore first'. But it won't restore and goes back to the 1st error message. Nightmare. Are you having any luck trying to solve this?
Turns out I had iTunes version 7.6 on my work PC. I completely uninstalled iTunes including all the relevent services. I Installed a fresh version of iTunes 7.7
I tried to restor using directly to 2.0 and it worked.
So, My home PC was probably the source of the 1602 and 1604 errors.