Something that helped 4 iphone update: try plugging in without the craddle

I like everyone else had a terrible time with update 1.1.1, and my problems still aren't over, but...
When I installed the update, I had the same problems as a lot of other people. The install took a long time, seemed to install, and upon the device reset (still hooked up to iTunes) the whole thing seemed to crash. After that I, kept getting "cannot connect to iTunes" errors, "unknown error (-18)", "cannot read SIM", and "restore factory settings" errors from iTunes when I tried to reconnect. I tried everything: restarting the phone, restarting iTunes, reinstalling iTunes, reseting my mac. I tried using different USB 2.0 ports (all 3 direct from the back of my machine)- nothing. All the while, my phone was dead/locked; I had no phone features, no signal at the top on the menu bar; it was like taking the phone out of the box- when you couldn't do anything unless you could hook up to iTunes. And I was freaking out & starting to get ******.
On a whim, I tried connecting to the computer with the iPhone cord directly into my phone instead of using the craddle & I got connected. iTunes found, saw & recognized my phone which basically brought my phone to back to life, where it was before the update with all my contacts, info & pics still there.
Unfortunately I haven't been able to complete a full sync yet (seems to start syncing but goes forever without finishing), but at least I have phone service again while I make time to get the problem fixed properly.

I had the same experience: Attempt update and (restore, fail (Error 1604), freak out, repeat).
After about 4 or 5 tries, I plugged the USB cable directly into the iPhone (instead of the dock) and it all worked.

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