IOS updates - fails *EVERY* single time, completely wipes out all apps

Ok, so I'm trying to be calm and collective about this but it will be extremely hard.
I updated the iOS version on my iPad (v1) today to 5.1.1.  Since I have had troubles every time I've updated iOS (regardless of device iPod, iPad, iPhone) I made 2 separate backups of my iPad before continuing... and specifically DID NOT CLICK on the "Hey there's a software update for your device" when it popped up when I plugged in the device as my very first experience with updating iOS on the iPad was done this way... and the backup failed, and thus never worked on the install.
So my device has 98% charge, I do 2 separate device backups (just in case)... hold my breath, and manually request an iOS update.
Progress goes smoothly, the device reboots, all looks good... no apps
Ok, not to worry, the update likely just gives me a clean image... (plus my wallpaper)... I'll just restore from 1 of my backups....
Restoring.... Rebooting....
Now its asking me to pick or setup an Apple ID... ok, fine... enter my ID/password.... re-state all my settings for wireless, location settings, iCloud (has always been NO)... and Booted....  STILL NO APPS
Repeated the restore backup process several times with each backup file... no luck... including a few clean reboots just to be sure.
ZIP, Nada, Zilch... All apps, all data, all music, all videos, all games, all game progress... you know... the efforts made over the past 6 months on several "resource management games"... all COMPLETELY GONE!!!
Now I used the feedback option in iTunes to send a similar message directly to them... but shy of a rant here I have no idea what I can do.
If all my data is lost forever... this ABSOLUTELY *****... not just because I lost it right now... but I don't ever want to buy/download another app now... if I know that there is a very, very high probability that I will again completely lose everything in the next iOS update.
So now I seem to have 2 options....
1.) Never update iOS on any device ever again due to fears it will fail and erase everything
2.) Simply shelf the device because I have no faith that I'll be able to maintain the data on it long term
Please tell me there is another option... a manual backup or restore option outside of iTunes.... or a way to look inside a backup file and make sure it really does have all the content you think it should have in it... in it.
I censored myself in this post... but for anyone working at Apple that wants to really understand my "mood" when writing this... insert 2-3 4 letter curse words before every CAPS or bold words... to get an idea of how insanely frustrating this whole process is.

1st off, thanks @turingtest2 I do appreciate your efforts it has helped explain some of this mess.
Well... as much as I'm ashamed to admit it... this does seem to be the case.
So, a "Backup" of an iOS device puts the "settings" back on your PC...
An "OS Upgrade" wipes your device of all content and updates the OS cleanly to the next level
A "Restore from Backup" effectively does next to nothing.... because in order to get all your stuff back... that you "Backed up"... you actually need to re-sync all your Apps, all your music, all your videos etc. manually once your "Backup" is complete.
You also need to figure out which apps were actually on this device because it maintains 1 list per account, not a list per device... thus manual hand picking is required.
Likewise you need to manually re-pick through your music and video collection because these settings too were not "really" backed up.
Seems completely messed up to me that the backup step doesn't save a list of the media (songs/videos) you had on the devices and automatically syncs them when performing a restore.  Ditto for apps.
I'm so glad my non-Apple devices don't follow this crazy 1/2 baked backup/restore scheme.
As a software developer myself... there's no way I'd release software this messed up....

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