SAME PROBLEM.
Brand new iPod touch, used for a few days with the original OS (2.2.1), then decided to get some new Apps some of which required an upgrade to 3.0 or later, so i purchased the software update 3.1.2 which on install = error 14.
If I try to restore on the computer on which i purchased the software update, it won't work, it progresses so far through and then error 14 pops up. I have the latest iTunes and restarted my computer and worked through other suggestion on
http://support.apple.com/kb/TS1275 and those suggested in this thread:
Tried holding shift to select the OS version to restore but the only choice i have is the 3.1.2 which i bought, and same problem happens if i choose it = error 14.
Tried turning off my firewall and anti-virus during the restore process = error 14.
Updated Windows USB drivers and all other components of Windows that needed updating 'just in case'.
On a different computer I followed the instructions to completely remove iTunes/quicktime/applesoftwareupdate/applemobile/bonjour and verified the removal process as per
http://support.apple.com/kb/HT1925 then downloaded iTunes again and installed - SUCCESS I restored to version 2.2.1, but this doesn't help me as I still can't use the new Apps I want, and when I plug it back in to my main computer, it wants to upgrade to 3.1.2 again, which starts the process over agin = error 14.
Had no problems downloading other Apps or iTunes or anything else, therefore don't believe the problem is with my ISP, and the cables and USB and iPod seem to work with the older OS to install Apps/photos/music/etc so it doesn't seem to be a hardware issue or USB problem.
Definately seems to be a very common problem with installing software updates on the iPod Touch, and i think only Apple can tell us why and what to do because nothing else anyone suggests seems to help.
Wasted HOURS on this. Grrrrr Arrgghh.