0xE error code

I am taking an Iphone 3GS that I no longer have service for and turning it to an ipod for my daughter. the phone or ipod is no longer recognized in itunes so it is not updating. I went through all the different things recommended by apple to fix the problem but still nothing. I know when I plug the phone into my computer itunes finds it because im getting a message that itunes has found an iphone but doesn't go on from there to sync or anything else.