iPhone 4s - stuck on restore

I am a new iPhone user. Purchased iPhone 4s from Apple store unlocked (16gb). Put micro sim in last night got it set up and running.

Tried doing software update to 5.0.1, it downloaded fine but then on restart it froze. I left it for 30 minutes but the bar was not moving. I googled potential solutions, with apple support website showing how to reboot which I did.

However, now it requires restore from iTunes which I have tried on my computer (latest iTunes installed) and it downloaded the latest 5.0.1. software on iTunes but it comes up with error that it was unable to restore (after it extracts the file within iTunes and begins "processing").

Any idea's what I can do? First iPhone and its such a headache getting it running!!