Error 3004 during restore - solutions aren't working

Question

Hi there, computer whizzes, programmers, knowledgable teenagers and master problem-solvers!
Now, I'm aware this sort of error is very common, and I've read pages and pages of forums and manuals, watched several videos and even bought a book on using iTunes for Windows. It's a simple, I'm told - iTunes want to connect to its servers to "verify" my restore/update, and it simply cannot get through!
Let me put this in better context...
(Yesterday, Nov 21st, 2013) I'm syncing my 5th Generation iPod Touch (never been jailbroken) to iTunes on my Windows 7 desktop PC (my hardware is ridiculously overpowered, so it's not a performance issue), like I've done, without issues, since I bought it in September of this year.
Now, guess what? iTunes alerts me that there's a software update for my iPod - iOS 7.0.4 or whatever it is. I think, "why not?" - the world's largest technology company will hardly be able to mess this up, will they? So I click download and install. It does so, and I'd better mention I originally had a 3-month-or-so out-of-date version of iTunes doing this (I wasn't bothered about the frequent updates, since I don't often experience problems with slightly outdated versions). After downloading the 1.2GB file containing the compressed iOS using iTunes' build-in download client, I clicked whatever it was that asked me if I wanted to install it on my iPod. The program runs for a bit, presumably backing up my iPod and removing the old iOS, essentially placing it back in factory settings ready for a new operating system:
This is where the problem begins...
Now, my memory may have failed me on a few of the minor details, but basically it reached the point where it was about to install the new iOS, having extracted the compressed file downloaded from the internet. At this point, with the progress bar in the iTunes programme literally one or two pixels from completion point, the dreaded noise of the windows alert pops up, along with an error message:
The pictures above are in order of appearance during the restore process, and this exact cycle has repeated itself about 20 - 30 times (yes, I've tried pretty much every solution out there).
I updated iTunes to the latest version as soon as the problem appeared, since my experience tells me that outdated software usually causes problems with upgrading a company's products.
The solutions I've been given have included:
- Re-installation of iTunes
- Disabling security software (I have AVG Internet security, paid version)
- Restarting computer
- Doing a selective start-up including only iTunes, mobile device utilities and quicktime
- "Repairing" iTunes
- Removing all perpherals connected to my system
- Changing my USB port (I have about 12 of them, and tried every single one)
- Fiddling with DFU mode
- Replacing the "hosts" file, or modifying it
- Re-downloading the iOS within iTunes.
- Restarting my wired connection to my router
None of these have worked at all - none have even changed which error message I get. Without exception, I've received error 3004 on each of my 20-30 attempts at a restore. It's very frustrating, to say the least - my organiser, my jukebox, my iMessenger, my calendar, my notes - they're all stuck as a backup within my computer in unusable form. My iPod's "bricked" to use a common phrase on these sites, and it's gradually, but surely, reducing my faith in Apple as the world's greatest electronics company.
Another suggestion was to use iTunes' "run diagnostics" feature. These are my results, which are also consistent without exception
As you can see, it seems the internet connection is the issue. So of course, using the same computer, I used Chrome to use THE INTERNET to search for a solution. I'm not ridiculously computer-"savvy", but I do know how to follow some fairly complex instuctions in computer use. So, in my probably naive opinion, I think the box above shows one or two issues with this diagnostics software. I apparently have no internet connection, yet iTunes is able to make a secure link to its Store, and suggest solutions found on the internet. If you're still in doubt, the iTunes Store works fine, as usual. I most obviously have internet connection.
If any of you computer geniuses have made it this far, here's what the diagnostics program within iTunes created for me, with my security software disabled:
Microsoft Windows 7 x64 Business Edition Service Pack 1 (Build 7601)
System manufacturer System Product Name
iTunes 11.1.3.8
QuickTime 7.7
FairPlay 2.5.16
Apple Application Support 2.3.6
iPod Updater Library 11.1f5
CD Driver 2.2.3.0
CD Driver DLL 2.1.3.1
Apple Mobile Device 7.0.0.117
Apple Mobile Device Driver 1.64.0.0
Bonjour 3.0.0.10 (333.10)
Gracenote SDK 1.9.6.502
Gracenote MusicID 1.9.6.115
Gracenote Submit 1.9.6.143
Gracenote DSP 1.9.6.45
iTunes Serial Number 003EB9800A0E4BA0
Current user is not an administrator.
The current local date and time is 2013-11-22 17:02:57.
iTunes is not running in safe mode.
WebKit accelerated compositing is enabled.
HDCP is not supported.
Core Media is supported.
Video Display Information
Advanced Micro Devices, Inc., AMD Radeon HD 6800 Series
**** External Plug-ins Information ****
No external plug-ins installed.
**** Network Connectivity Tests ****
Network Adapter Information
Adapter Name:          {3D399DA0-FD8E-48E4-A9B1-13689FD5BB70}
Description:          Marvell Yukon 88E8059 PCI-E Gigabit Ethernet Controller
IP Address:          192.168.0.2
Subnet Mask:          255.255.255.0
Default Gateway:          192.168.0.1
DHCP Enabled:          Yes
DHCP Server:          192.168.0.1
Lease Obtained:          Fri Nov 22 15:44:41 2013
Lease Expires:          Mon Nov 25 15:44:41 2013
DNS Servers:          192.168.0.1
Adapter Name:          {03F67058-58B8-4E19-8CE2-281892F84C1D}
Description:          VirtualBox Host-Only Ethernet Adapter
IP Address:          192.168.56.1
Subnet Mask:          255.255.255.0
Default Gateway:          0.0.0.0
DHCP Enabled:          No
DHCP Server:
Lease Obtained:          Thu Jan 01 00:00:00 1970
Lease Expires:          Thu Jan 01 00:00:00 1970
DNS Servers:
Active Connection:          LAN Connection
Connected:          Yes
Online:                    No
Using Modem:          No
Using LAN:          Yes
Using Proxy:          No
Firewall Information
Windows Firewall is on.
iTunes is NOT enabled in Windows Firewall.
Connection attempt to Apple web site was successful.
Connection attempt to browsing iTunes Store was successful.
Connection attempt to purchasing from iTunes Store was successful.
Connection attempt to iPhone activation server was successful.
Connection attempt to firmware update server was successful.
Connection attempt to Gracenote server was successful.
Last successful iTunes Store access was 2013-11-22 17:01:17.
**** CD/DVD Drive Tests ****
LowerFilters: PxHlpa64 (2.0.0.0),
UpperFilters: GEARAspiWDM (2.2.3.0),
D: HL-DT-ST DVDRAM GH22NS70, Rev EX00
Drive is empty.
Error Correction is turned on for importing audio CDs.
**** Device Connectivity Tests ****
iPodService 11.1.3.8 (x64) is currently running.
iTunesHelper 11.1.3.8 is currently running.
Apple Mobile Device service 3.3.0.0 is currently running.
Universal Serial Bus Controllers:
Standard Enhanced PCI to USB Host Controller.  Device is working properly.
Standard OpenHCD USB Host Controller.  Device is working properly.
Standard OpenHCD USB Host Controller.  Device is working properly.
NEC Electronics USB 3.0 Host Controller.  Device is working properly.
FireWire (IEEE 1394) Host Controllers:
VIA 1394 OHCI Compliant Host Controller.  Device is working properly.
Most Recent Devices Not Currently Connected:
iPod touch (5th generation) running firmware version 7.0.2
Serial Number:          CCQL52FCF4K4
iPhone 3G running firmware version 3.1.3
Serial Number:          88843E4MY7H
**** Device Sync Tests ****
No iPod, iPhone or iPad found.
It's a long list of technicalities, and if you, brave genius, can solve my desperate 1st-world problem, please post an answer. I'd be most grateful, and I'm sure it'll help out some unlucky people in the future. I'm pretty much at breaking point - hence the post on Apple's help forum. I'm hoping I've missed something obvious, since I'm not going to re-install my whole Windows 7 operating system. I'd rather buy a Mac. Just kidding. I'll never buy Mac now.

Answer 1

1.) Locate "C:/Windows/System32/Drivers/etc/hosts". Copy the "hosts" file onto your desktop as a backup if any errors may occur during the process.
2.) As an administrator, open the "hosts" file inside "etc" folder with Notepad and erase the last lines related to gs-apple that looks like this:
"#127.0.0.1 gs·apple·com"
3.) Restart iTunes if opened and connect your device after it is in DFU mode.
4.) Casually do a restore like normal, and you're done.
5.) After restore is completed, replace the "hosts" file inside the "etc" folder with the backup you've copied onto your Desktop to prevent possible future errors. Hope this works!