New to Apple, I think my ipod touch is doa

Hello all
First of all, I would just like to say I am new to Apple and the discussion forums so hello to all!
Unfortunately, my main reason for joining isn't a positive one. I have received an 1st gen 8gb ipod touch from an upgrade offer with a mobile phone network (UK). After a long wait and several complaints to them, they finally sent me the ipod. However, I think the device is dead on arrival.
When I first unboxed it, I did the usual thing: Download iTunes, connect the device to my computer. iTunes informed me that the device was in "recovery mode" and that I must "restore" first to use the iPod. This is where the problem is, the restore process does not complete. I get an "1604" error.
I went to an Apple store, where a kind member of staff attempted to get me started with the device only to encounter the same problem. He pointed out to me that on the same page as the "restore" button in iTunes, the ipod information does not state the device capacity and other information which he found wierd. Could this be clue to whats going on?
The mobile phone network don't want anything to do with my problem as it was a promotional offer, also they no longer have stock of the device and the new ipod is out now. They insist I should take up my problem with apple.
Has anyone had experience with this? Maybe there is someone out there who has also had a doa device. Any advice is much appreciated. What are my options? Am I able to have this device repaired or replaced?
Many thanks in advance
-J

Typical phone service.
Not the 1604, this will lead to error (6).
Had this while trying to update to 2.0.
Congradualations to your phone company for sending you an iPod with an overloaded hardriive incapable of handling a software too advanced for it.

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Could be since it (security software) is listed as #5 in the following:
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Make a new Apple ID for her.
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iTunes: How to move your music from one computer to another:
http://support.apple.com/kb/HT4527

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New to Apple, I think my ipod touch is doa

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