I had the same problem but I did find a quickfix that was I found on youtube. My phone will not upgrade to the IOS5 and it will not restore. So until I get to the Apple store this is just a temporary fix. I hope this will work for you all.
1) Go to the website http://ih8sn0w.com/
2) Click on iREBr4 (For IOS 3.x.x. to 4.x.x.)
3) Once the pop up box appears click on Regular Download then click the link to download
4) You will save the file to your desktop or other destination.
Make sure your phone is connected to your computer before doing step 5.
5) Open the iREB-r4.exe file and when it opens click "Recovery Mode Loop Fixer" then "Set Auto-Boot True"
You can try these instructions if you would like to just get your phone working from being frozen. This is just a temporary fix that worked for me.