Like many I kept trying to updated to IOS5 last night and found myself in a restore loop, and lastly a bunch of errors saying an error occured (1) which prevented the restore from completing.
I found iTunes had moved iOS 4.3.5 to the trash (.ipsw file), grabbed that and moved it to a safer location.
Rebooted my ipad into dfu mode (held down both power and home for 10 seconds - then released power and held down home for another 15 seconds... in which the screen went black but itunes still recognised that it needed a restore).
Lastly when clicking the restore button - I held down the option key which brough up a file selector and I was able to pick my saved iOS 4.3.5 and restore with that finally. Just syncing my apps again now. Will wait until this fiasco is sorted out before attempting the upgrade again.
Hopefully this helps someone not waist the hours I wasted trying to get anything working on my ipad last night.
Regards,
D