iPod Touch 3G stuck in recovery mode?

I tried to download and update my iPod touch 3G to the newly released iOS 5. I had previously downloaded and updated my iTunes to the latest release and so I thought this wouldn't be an issue. I plugged in my iPod, iTunes opened, and I tried to update. All was going well, I let it sit and do its thing only to come back 2 hours later and find that iTunes no longer recognized my device and that the update did not work.

Now, my iPod is stuck in recovery mode with the picture of the USB and the iTunes logo. I've tried the DFU holding down both the power and home buttons, but it just restarts and returns to the recovery screen. Now, iTunes does not recognize it and tells me I have to update and restore. Good, I tried to restore and about 5 minutes in an error comes up saying it's in recovery mode and needs to be restored to work with iTunes.

This has become an infinite loop for 3 days now. I cannot get it out of recovery and I cannot get it to update and restore. What do I do?!