Failed iPhone software update to 2.0, failed restore with error 1604

I downloaded the latest iTunes 7.7 and upon "Check for Update", I was notified that iPhone firmware 2.0 for the 2G iPhone was out. I downloaded the firmware, synced/backed up settings, and then rebooted. Then something went wrong...
I restarted iTunes and the iPhone, per Apple support suggestion, and iTunes found the iPhone connected, but displayed "iTunes has detected an iPhone in recovery mode. You must restore this iPhone before it can be used with iTunes." I clicked OK, and then Restore. The restoration process began with an option to either cancel or "Restore and Update". Cancel is a worthless option, so I did "Restore and Update". Here it begins extracting the software and then prepares the iPhone for restore. The iPhone flickered, disconnected and reconnected to the computer, and then presumably continued the process until ending with the following error: "The iPhone "iPhone" could not be restored. An unknown error occurred (1604)." Nothing else happens.
I've tried everything, and am really at my wits end. I have installed/reinstalled iTunes several times. I have tried reinstalling drivers. I've tried rebooting the computer several times. I've tried disconnecting and reconnecting everything. I've been restoring this iPhone for a good 3 hours and nothing seems to work!
I am supposed to give this iPhone to my mother for her birthday tomorrow and now it won't even turn on. A brick makes a great birthday gift afterall...
Any ideas?

People who have still not solved error 1604 and had a bricked iPhone no matter what they tried, might manage to revive it by following these instructions (on how to downgrade from 2.0 to 1.1.4).
You will need the following:
- iTunes 7.5 (NOT 7.7)
- iPhone firmware iPhone1,11.1.4_4A102Restore.ipsw
Step 1:
Uninstall iTunes 7.7 completely if you have it and restart your computer.
Step 2:
Install iTunes 7.5
Step 3:
Your iPhone should be in 2 states, either stuck on the "Slide to make emergency calls" screen, or you tried to restore before and it's stuck on the new look "connect to iTunes" screen. Either way you're ok.
Enter the phone in DFU mode (You must have the iPhone connected to the computer and iTunes running). To do this, hold the power & the home button down for about 9 seconds.
Why 9s? Well people say 10s, but it depends how slow you are at counting. Too short and it doesn't work, too long and the apple logo appears.
When you hit about 6-7s the screen should turn off, leave it for 2 more seconds and release the power button, STILL holding the home button. If all went well, you should NOT see an apple logo, the screen should be dead.
Keep holding home until windows/Mac informs you that it's found new hardware, OR iTunes tells you that your iPhone is in recovery mode. Remember, screen should be blank.
If you see an apple logo, repeat the process for less time until you get it right. Took me a little time.
Step 4:
Shift/Option click the restore button in iTunes and select the iPhone1,1_1.1.4 firmware you downloaded.
Fingers crossed it should restore back to 1.1.4.

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As for my disparaging remarks, it is the way I feel and felt like voicing it at the moment. As I recall this is still a free country (Obama thankfully has not been able to screw everything up) and I personally have never liked apple products or software. That’s my personal opinion, it is crap. This particular phone is supplied by corporate and I will get a different phone as soon as request is approved. MS software has always been much better than apple products in my experience and at a much better price.
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It seems like every time I try and update either my iPhone 5s or my iPhone 4 to the latest iOS version, I have problems. Here are my two most recent experiences:
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Best Regards,
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are trying to better understand customer views on social support experience, so your participation in this
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