"network connection timed out"-can't update upgrade on ipod

Last year an ipod touch 8GB was given to me and I am just now updating everything. When I plug my ipod into my computer and open itunes, it prompts me to download and install 3.1.3 upgrade. So I hit "download and install" and right after it gets done downloading (takes 7 min), an error message pops up and says "network connection timed out"- could not install the upgrade, try again later. I have paid the 5 bucks for the upgrade and tried it about 10 times now with the same results everytime.
I have tried turning off my router and restarting that and also reset my network connections on the actual ipod itself with re-typing in my network name and password for the wifi. My wireless connection is strong and never goes out on me, as well as my ipod always recognizes it and connects automatically so I'm not sure why I keep getting this error message!
HELP!!! thx

I ran into the issue this week. said yes to upgrade, ipod was backed up, and then upgrade died. ipod touch itself indicated it was no longer aware. power down did not help, itunes could not restore to previous. Looking on apple site, I was getting a code 14 error. solution was to update itunes to 9.03, restart system and then retry the download. it worked after that, and the backup did restore all my info including kindle books etc.

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