Just downloaded ios 7.0.4 for my iphone4 and backed up before doing so. Now that it's been updated and restored I keep being asked to setup my iphone. When I select restore from itunes I keep getting stuck on setup iPhone. Cant get back in phone!

I backed up the phone and updated to ios 7.0.4 which took about 2 hours.  Now the phone powers on and says hello in different lagnuages and says to slide to setup.  I am asked to choose a network and then if I want to setup as a new iphone, restore from icloud or restore from itunes backup.  When I select restore from itunes the screen says "connected to itunes".  In itunes I select restore from backup however after a few seconds itunes says that it cannot restore beause there is not enough free space on the iphone.  During this attempt to restore I see the home screen and my screen saver and everything for a split second, then the phone powers off.
I see in itunes that all of my photos and data are still on the phone however I cannot get into the iphone.

Have you tried restarting or resetting your iPhone?
Restart: Press On/Off button until the Slide to Power Off slider appears, select Slide to Power Off and, after It shuts down, press the On/Off button until the Apple logo appears.
Reset: Press the Home and On/Off buttons at the same time and hold them until the Apple logo appears (about 10 seconds).
No data will be lost.

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