iPod Touch 16gig Vista 32bit iTunes 10.0.0.68 version 3.1.3(7E18)
Here is what is happening:
When I connect the touch to the computer everything appears to be working. After sync a error msg pop up. The application "UNO" was not installed on the iPad "X" because an unknown error occured ()xE8000004)
It may not fix your exact problem, but I had the same error as you and yes I had tried everything I could think of. In the end out of desperation I bypassed my router by plugging the modem directly into the computer and the problem was solved.
If this doesn't fix your error you may want to disable you firewall software while you perform the update then re-enable it again afterwards.