UNKNOWN ERROR 1 ON RESTORE ???

You may have tried this already, but this article describes the first steps.

http://support.apple.com/kb/TS1275

Every issue you have regarding an iPhone can be searched on the apple.com/support website, type TS3694 in the support website search bar.this document is used daily by Tech support to troubleshoot errors and resolve them.

Error 1 or Error -1 normally means you have a hardware issue. Your device comes with a 1 yr hardware warranty and 90 days of Tech support, if it is a hardware issue depending on the type of device you can get a replacement. The iPhone 4 is $149 the 4S is $199 when out of hardware coverage. The article suggests that you restore the device as new on a known good-working computer. If the issue persists after a restore as new, then that indicates the hardware is faulty.

trying to solve this issue, i have the same problem, about 60% completes and give out error 1.

Has your phone has any liquid damage?

If so, then I read on a website, that some iphone have a toshiba chip where once it gets wet, you cannot restore your phone, you will have to replace the chip.