Update to iOS 5.1 causes iPhone to crash on "Restoring iPhone Firmware"

Question

Hello everyone.
I have been vry please with my iPhone 4 on Verizon for the last 6 months.  I was on iOS 5 which worked great.  Then this morning the AppStore icon had the familiar red circle indicating some apps had updates available.  I clicked Update All.  In there was an update for iOS5.1.  I clicked OK.
I gave me the usual License agreement etc… I clicked OK.
A few minutes later I looked at it and it showed a picture of a cable with an arrow towards an iTunes icon.  SO I plugged it to my computer and it launched iTunes.
iTunes tells me that my iPhone is in Recovery mode and I need to Restore.  Why is it in Recovery mode???  All I did was I clicked OK for software update!
I have no other choice but to click Restore.  It asks if I want to Restore and Update.  I click OK.
I downloads the software (25 minutes worth!!!) then goes through the motions.
- Restoring iPhone software
- Verify iPhone software
- Verify iPhone Restore
- Restoring iPhone firmware.
After it sits on that Restoring firmware with a striped bar for about 30 seconds, all of a sudden, a new window pops up and says "The iPhone "iPhone" could not be restored.  An unknown error occurred (1)."
iMac 2.4G 24inch .  OS 10.6.8  All my software is up to date as of this morning.  That includes the most recent iTunes.
Nothing else is plugged in the USB ports.
I have restarted the computer.
No third party firmware.  No illegal mods.  No jailbreaking or anything, all on the up and up.
I have called Apple tech support but was put on hold for 30 minutes and finally had to go to work.
I have done a search on this and other boards but could not find a solution.  Would anyone have any suggestion?
Thanks for any help.
Bo

Answer 1

UPDATE: 
I tried about 6 or 7 times with no luck.  Maybe trying even more would have worked as Milis and some others have said.  But I ran out of patience.
So I called Apple tech support.  After a few minutes a woman answered, I explained the problem, she said that since it was out of warranty, it would cost $29 for a one time incident.  I said that since I did not initiate this problem I did not think I should have to pay for anything.  Then she put me on hold, and evidently sent me to the slow cue.  I waited for about 20 or so minutes and another woman answered.  She was very friendly and tried to be helpful but this was clearly out of her league so she transferred me to a specialist.  A very friendly british sounding woman came on and really wanted to get to the bottom of this.  She did a remote access to my computer so she could see the contents of the log files.  After a while, she determined that it could not be repaired.  She told me the phone had to be replaced. 
So she filled out a request to that effect, gave me the location of the nearest Apple store and made an appointment for me.  I went there during lunch and they replaced my phone with a new (or new looking at least) unit.  They set it up and now everything is fine.  It is still on iOS5 but I really don't have any pressing need for iOS5.1 so, given this previous experience, I'm going to stay with 5 for a while.
Bottom line is that this was a real pain and huge waste of time.  But Apple support did come through without any trouble (apart from the waiting on hold) and got things fixed and working again.  The people I talked to did not have any idea of what might have caused this.  But one thing I was remember is this:  Usually I always do iOS updates through iTunes with the iPhone connected to the computer.  This was the first time that the update was started with the phone unconnected because it came about through the "Updates" panel of the phone's AppStore icon.  I'm not sure why this would cause the firmware update to go south but that is the only thing I can think of.
At the end of the day, I think I have to put that in the "You want cutting edge technology? well it's going to work most of the time but every now and then there will be the inevitable pothole" column.
Bo