HT4972 Problem trying to upgrade iphone 3GS.

Why do I receive this message when I try to update my iphone 3GS?
"An error occurred when backing up this iphone. {-37}  Would you like to continue to update this iphone? Continuing will result in the loss of all contents on this iphone."
Have the latest version of Itunes installed
Uninstalled 3rd party firewall. Unplugged all devices from USB except mouse and keyboard.
Temporarily disabled Antivirus program.
Added apple websites to trusted sites, including
Ran Diagnostics - Passed all steps
Checked hosts file - not blocking itunes from communicating with the update server
Verified Ports 80 and 443 are not blocked
What else can I try?
Thanks,
Gail

Follow All the Steps Here  >  http://support.apple.com/kb/HT1808

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