I Pod touch Will not Update Software

HI, I got an I Pod Touch Model MC540LL (Dont know what Generation it is), Ive tried several times to update software from 4.3.3 to the new 5.0.1? Is that possible? When I try updating using Itunes, the downloading stops and tells me (server reset) I am trying to restore settings to my I Pod because I lost my Passcode for the restriction function (the Restriction function is stuck on (ON)). I am unable to do this with out updating software. Is there any way to restore my I Pod without updating software?

Yours is a iPod Touch 4th generation with 8 GB storage. Yes, it's possible to update to 5.0.1. Do you have the latest iTunes 10.5.2? Update iTunes and do a restore.

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