Are you using itunes 11 on computer?
You can also try a different computer.
How did you attempt DFU mode?
DFU mode = Device Firmware Update mode
DFU mode is a mode where the iPod Touch/iPhone will be made to force a restore of the firmware into whatever version firmware it is given.
Getting your iPod Touch/iPhone into DFU mode is somewhat tricky, and it may require some patience/practice because timing is essential to get it to DFU mode and not into recovery mode.
1. First, Open up iTunes, plug in your iPod Touch/iPhone to the CPU's USB port. Turn on your CPU's speaker and make sure it is loud enough that you can hear it.
2. Hold down the Home button and the Power button ( simultaneously, until the screen goes black and the device turns off. (past the red slider/slide to power off screen)
3. Now let go of the Power button, but continue to hold the Home button. Your iPod Touch/iPhone should have turned off and the screen should not be on.
4. After around ~10-20 seconds, you will hear a noise (beep/ding) from your CPU as if it had just recognized a new hardware device, now iTunes should recognize it in DFU mode.
5. After iTunes recognizes the iPod Touch/iPhone, let go of the Home button otherwise it will go into recovery mode and you will have to do the entire DFU process over again.
6. You will know when you have put your iPod Touch/iPhone correctly into DFU mode when the display is blank and that you do not have anything on your device.
And you are done, now you can install any iPod Touch/iphone,ipad on to your device via the iTunes SHIFT recovery method.
Does this apply to iPad 2 Wifi+3G? coz i tried this but still did not fix the problem...
it just got me so frustrated coz i had to download the update again thru iTunes w/c
it says "iPad software update 5 hours remaining" [5 HOURS!!!???] and when you
are about to install it says file corrupted or something like that then it would ask
you to update and restore again! this really so frustrating... any updape on how you
fixed the problem? if you have...