IPhone stopped working.  Won't turn on or charge.  Stuck in recovery...

Hello. I need some help with my iPhone... Please help.
Here is my problem:
The other day I dropped my phone during a call. After picking it up, I looked at the screen and saw that the call ended, and then the screen went black. I have been unable to turn the phone back on since. There is no physical damage seen on the exterior. The phone does not respond when plugged into a wall charger. It does not respond to a simple reset (holding home and power). It only responds when connected to iTunes.
When plugged into the computer (Windows Vista machine), iTunes states "iTunes has detected an iPhone in recovery mode. You must restore this iPhone before it can be used with iTunes." I then click restore, and it goes through the process. The screen on the iPhone goes white for a few seconds, then shows the Apple logo - while iTunes is "Preparing the iPhone for restore." After a bit more, a progress bar shows up along with the Apple logo - while iTunes is "Restoring iPhone Software". The "restoring" process completes, showing approx 33% on the iPhone status bar, then iTunes shows "Verifying iPhone software". This completes, showing approx 60% on the iPhone status bar, then iTunes shows "Verifying iPhone restore." The iPhone status bar gets to about 66% and this is where it stops... iTunes never gets past the "Verifying iPhone restore" stage.
I have left this on overnight, as well as tried process many many times over the course of 4 days. After reading various posts around the web, I have tried "Clearing the sync history" in iTunes, and manually deleting the files from these folders: 'AppData/Roaming/Apple Computer/iTunes/Device Support/' 'AppData/Roaming/Apple Computer/iTunes/iPhone Updater Logs/' and 'AppData/Roaming/Apple Computer/iTunes/iPod Updater Logs/'. I have also tried holding shift while clicking restore, and manually selecting the newest firmware.. I have tried with the SIM card in/out. No matter what, I still get the same results - stuck at "Verifying iPhone restore..."
I am not sure what else to try, short of going to an Apple Store. My phone is 1 year and 3 months old, so it is out of warranty. Will taking it to Apple even help? Or will I have to purchase a replacement? ($199!) ... Because it shut off after being dropped, is there possible internal damage? If so, can this possibly be repaired? And what may the problem be? Any help or advice would be greatly appreciated.
Thanks in advance.

I believe your only option is making an appointment at an Apple store if there is one nearby where it can be determined if your iPhone can be restored with iTunes there.
If not, more than likely there is a hardware problem with no way to know what the problem is without being diagnostically tested.
Apple doesn't offer a menu of repair services for the iPhone except for replacing the battery for an iPhone that is no longer under warranty. Apple offers an out of warranty or not covered under the warranty "repair" price, which pays for an exchange at a discounted price off the full retail sales price ($199 plus tax) which doesn't require signing a new two year contract with AT&T.

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