FINAL UPDATE:
UPDATE #2:
So as I described in my prior post, I was able to fix this issue by backing up my iPhone to iTunes, then erasing the phone, then restoring from backup in iTunes. This completely eliminated the popup and I have been using my phone since then without issue.
However, I am now able to duplicate the problem, and it's definitely an issue with music downloads on the phone. I do think it's specifically the Digital Booklets that are part of album purchases. That's why for some people it was the U2 album that automatically downloaded. For me, that was NOT the problem because the U2 album never downloaded to me device, nor did I try to download it (I had auto downloads disabled).
For me, it was the purchase of an entirely different album that caused the problem (but an album that still had a digital booklet). I didn't know that was the problem until I tried to purchase another album after doing the erase/restore on my iPhone.
So I purchased an album from iTunes on the phone and everything seemed to download fine (all of the songs and music videos downloaded fine). But guess what popped up at the end of the album download? Yep, the "Unable to download item" message. And now, it's doing the same thing where it appears EVERY time I do a reboot of the phone, and pops up occasionally while using the phone too.
And again, I have tried everything to fix the problem without success. Since I knew exactly which Digital Booklet was causing the problem, I thought maybe I could fix it. I plugged in my phone to my Mac and attempted to do all sorts of syncing with Music on/off, Books, on/off, etc. If I try to open the Digital Booklet for this album on my Mac, it will not open (says it's corrupted, even if I redownload it from the cloud). Not sure if that is part of the problem or not.
At any rate, I am now doing another erase and restore and will NOT be doing any kind of music downloads on the phone until this problem is fixed. It's definitely an issue with cloud downloads of music albums. I could probably have avoided the problem by just downloading the songs individually instead of touching the Cloud icon for the entire album. I would think that downloading individual songs would be okay, but I don't want to be the guinea pig again! LOL.
Can anyone else verify this? If you're brave enough to try it out, just download an album you've already purchased by going to iTunes on the phone/iPad, click the Cloud icon next to the entire album (not the songs themselves). Wait for your entire album to finish downloading, and then see if you get the error. If not, reboot and see if it appears then. Make sure it is an album that has a DIGITAL BOOKLET with it.