I think the issue is that you haven;t got the device in recovery mode. It can take an attempt or two. Here are the instructions again from http://support.apple.com/kb/HT1212
Alternatively, place the device in recovery mode and restore it to erase the device:
- Disconnect the USB cable from the device, but leave the other end of the cable connected to your computer's USB port.
- Turn off the device: Press and hold the Sleep/Wake button for a few seconds until the red slider appears, then slide the slider. Wait for the device to shut down.
- While pressing and holding the Home button, reconnect the USB cable to the device. The device should turn on.
- Continue holding the Home button until you see the Connect to iTunes screen.
- iTunes will alert you that it has detected a device in recovery mode. Click OK, and then restore the device.
Do you get the "Connect to iTunes" screen?
Yes I get the connect to iTunes screen and the computer recognizes the iPad in recovery mode. In the middle of restoring and updating the iPad, my computer comes up with the error saying the ipad cannot be restored because of the passcode lock. Then the iPad goes back to the way it was before the connect to itunes screen.