Itunes could not connect to the iPhone "" because of an unknown error occur

New to iTunes and iPhone (3g 8gig black)...
Apple store was unable to activate the phone in the store...
I installed iTunes today 7.7.0.43 and plugged in phone and got the message:
itunes could not connect to the iPhone "" because of an unknown error occurred (0xE8000035).
Vista thinks I have a "Digital Still Camera" when i plug it in but the driver for the "Digital Still Camera" fails to install...
I rebooted the computer.
I restarted the iphone (Pushed top button then slide to power off and then pushed again to power on)
I reset the iphone (top and home button for 10-15 seconds till i saw apple logo)
any ideas?
ps - i tried calling 1-800-my-iphone but i was unable to get to a person - is their tech support always that crappy or just today since its launch day?

This may not make you feel any better, but it's not you, it's not your new phone, and it's not the way Apple normally works. It is extreme overload for today. I have one of the original iPhones, and today I tried to simply get the new software, and after all the download and firmware updating, I got the same message you did. It had persisted all day, and, I'm sorry to say, is likely to for the rest of the day. I'm on a Mac, so it's not a Vista thing, either. Other people I know who bought the new phone are also experiencing the same thing. Spread the word! Discourage anyone from upgrading today! Or they, too, will be WITHOUT A PHONE!!
Good luck to us all,
Shelley

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