Help upgraded 3GS wont register with latest itunes error 1601 occurred

hope one of you lovely lot can help me out.
I receieved my upgraded iphone on friday and so far have been unable to register it. I plug it into laptop and it asks me to update itunes/phone software, during the install i get a hardware error message "the software you are installing for this hardware DVD/CD has not passed windows logo testing" and will not be installed properly.
It then continues to install but advises its not complete.
The phone then wants to restore and i get another error message "the phone could not be restored an unknown error occurred 1601"
I have searched the web and tried all sorts to resolve it uninstalling itunes and reinstalling, manual restore with the buttons on the phone, i have also tried on another PC and i get the same problem on both!!!! and to top it off im not the only one with this issue in our household my boyfriend's iphone was working fine until the latest itunes came out and his phone also went into restore mode with the same error message, we some how managed to get his phone working but only by syncing it with another pc however he has lost all his contacts apps and data.
sorry for rambling on but i have tried to include all of the issues in the hope someone can help me.
cheers in advance! x

The above post has nothing to do with error 1601 and includes hacking methods for jailbroken phones - to "restore with the new custom firmware you created."
To fix 1601:
http://support.apple.com/kb/TS3694#error1601

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