How to restore a corrupted encrypted backup?

I have a problem restoring backups. My mom wanted me to upgrade her iPad 1 from iOS 4.2 to iOS 5. I'm running Windows 7 with the latest iTunes. So I plugged her iPad in and clicked update. iTunes promted me to update and I clicked it. Then it told me that it would backup the iPad and then wipe it and update it. So I accepted the prompt and it upgraded successfully to iOS 5. Now I wanted it to restore the backup so I selected the backup file, entered the password, and the restore completes half way then tells me that iTunes cannot restore the backup because the backup is corrupt or not compatible with the device.

I am at a loss on how to fix this problem as this is the only backup file as my mom never plugged her iPad in since she bought it.

I understand that there are apps to read from the backup file and extract stuff from it but they don't support encrypted files. I tried one program and it told me that the backup is complete and intact except for the fact that it is encrypted.