I too was attempting the big leap over the chasm from ioS 4.x to ios 7.x on an ipad2 these past few days. After reading sundry suggestions on prepatory steps before making the update, I had used a direct connection of ipad2 to my windoz-based laptop and iTunes in order to make as complete a backup as possible. I also separately made efforts to do non-iTunes backup methods such as exporting camera roll to MyPictures on Windows. Found ways to backup my contacts with a vCard app, too. Transferred all my purchases to iTunes, etc., as suggested in the numerous upgrading suggestion threads...
OK, so I then proceeded to upgrade the ioS via iTunes connection to my PC (the only choice since I was on 4.3.3 ioS and could not use OTA method). The upgrade appeared to occur without issue. When I finally saw the "HELLO" in multiple languages, did the swipe, entered language choice, entered my network credentials, etc, I ended up with choice of treating ipad as new, or restoring from a backup via itunes. At the time, it seemed to make sense to choose the latter and restore from the backup I'd so carefully made previously. Did the restore from backup via iTunes. (Notes: Be sure iTunes is of latest available version AND in Edit/Preferences/Devices be sure to put Check Mark in the "Prevent iPods, iPhones, and iPads from syncing automatically" checkbox--worry about syncing later).
Upon selecting the restore from backup option, I observed ipad to appear to be restoring correctly and then, at the end of the progress bar as observed on the ipad2, the looping began and I was back to the "HELLO" swipe in multiple languages. I agree with another poster above that this is likely an oversight by Apples developers to account for those of us updating from ancient ioS's that didn't have iClouds support.
It appears that when you select the restore from backup option and let it proceed, things ARE actually restoring, but you'd never guess that by virtue of ending back up at the "HELLO" setup stuff. As above poster(s) have mentioned in this, and other similar threads, have some faith that YOUR backup DID actually get restored properly. Then, as you loop through the setup again, DO then select the option to treat ipad as "NEW" and you will be pleasantly surprised to be walked through a bunch of new stuff, mostly related to iClouds setup, and when you exit out of the update tunnel, voila, your prized backup should be evident. At least mine was, PHEW!!!!