Upgrade worked, Itunes is saying it cannot connect due to password.....

I just upgraded to the 3.0 OS, however upon the phones final restart Itunes prompts me with "Itunes cannot connect to "xxx" because it is locked with a password. You must enter the passcode on the iphone before it can be used with itunes."
The problem is my phone doesn't let me enter my password, the only thing on the screen is the USB to Itunes logos and the slider for emergency only calls.
I just got the phone today.... everything was working fine and I had set a password for security reasons. I hope Apple didn't make this update and not anticipate users with passwords....
Can someone please help me resolve this?

Try this, it worked for me. With the cable connected to iTunes hold the "Home" and the "sleep" button together to reset the phone. Turn the phone on again and you'll get the password keyboard. You may need to click through the "connect" message on your mac but it will get you to iTunes eventually.

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