I finally called Apple Support and they walked me through. Seems the problem is with iTunes, well basically their welcome screen!
Here are the steps I took via Apple:
- Plug the phone in to the computer using the proper cord.
- At the iTunes "Welcome to your new iPhone" screen SELECT> SET UP AS NEW PHONE
- This brough up the normal iphone screen.
- SELECT > RESTORE FROM BACKUP
- After restoring, my iPhone did not automatically restart, so I had to manually turn it on
- I unplugged the iPhone and re-plugged it back in
- Once it appeared in iTunes, I clicked on it in the sidebar
- The normal iTunes screen opened and I was able to go through the tabs and select the apps, photos, music, books, videos etc. to sync
- Click > Apply and the iPhone sync began
My iPhone 5 works flawlessly now with all my previous data, apps and music on board. I rarely call customer support, but frustration set in. Apple needs to either fix the iTunes screen or place instructions on the splash screen saying you can access restore and sync by choosing the "set up as new" option without losing your data!