"Files in use" error when trying 1.2 update in iTunes 7.0

Question

When iTunes 7.0 comes up, it says that an update is available (I've got 1.1.2 on my iPod) and asks if I want to update to 1.2. I click "Install" and my iPod comes out of the "updating" state, then re-enters it, then iTunes puts up a dialog with the msg: "The iPod cannot be updated because it contains files that are in use by another application." HAH! The only thing in use is iTunes. I've disconnected contacts update with Outlook, made sure Outlook is not running in Task Mgr, etc. AFter clicking "OK", my iPod stays perpetually updating, though iTunes says it is finished. I disconnect after I hear the iPod hard drive power down and all seems ok. Apple's iPod update integration with iTunes is unstable (witness all problem posts). They should at least bring back manual update for those of us who don't mind doing it that way. Anyone else have this problem and have a solution???

Answer 1

Success! At least my iPod finally updated and no longer hangs in 'Update' mode forever. Here's what I did:
* Follow instructions at http://docs.info.apple.com/article.html?artnum=93716
I did everthing up to and including "Empty your Temp directory and restart"
* After installing and starting iTunes, my iPod updated songs, etc. normally.
* I clicked on update btn. Got and "updating iPod" msg box.
* Got an error 1417, and iPod no longer appeared in iTunes.
* Shut down iTunes and restarted.
* iPod updated songs, etc. normally.
* Clicked on update btn. got "updating iPOd" msg box and this time it actually worked.
* I think it was an accident that it actually worked, but you might try this yourself. It shouldn't have been this difficult.
Windows XP Pro