When I plug phone into computer, Itunes wants me to restore (3GS OS4update)

Since I updated to os4 my iphone has been terrible, It is slow, I keep getting the "Crash Tool" error when syncing and most troubling is not every time but frequently when I plug it in Itunes tells me I have to restore from backup or as a new phone. What is this?

So you're trying to set up your wife's phone as a new device? Just go to settings > general > reset > erase all content and settings, and you'll get a new device

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