When i try to update my iPhone 3gs with new IOS and it won't restore and update

i Tried to update my 3Gs with the new IOS 5 and now it has the plug into  itunes sign. I plugged it into itunes and it told me its in recovery  mode and it needs to be restored. when i click restore i can only  restore and update it but once it is don extracting the software and  preps it for restore it tells me it has an unknow error. when i hit ok  it tells me to restore it again. i tried all the troubleshooting steps  none helped. Any ideas?

I have spent the better part of three days on this.  Yesterday I took it to the Apple store and they looked at it and tried to DFU (hold the lock button for 5 seconds, then press the home button along with the lock button for 10 seconds, THEN, let off the lock button continuing til the 'connect to itunes' symbol.
They say that my phone has a bad memory module or logic board.  Funny, it worked fine up until I updated.  Seems to big of a coincidence to not be related.
The only thing that seemed to get access was using redsnow unlocking tool (my phone is NOT unlocked).  I was desparate to try anything.  I tried to load a different firmware but still no luck.
I have a blackberry through work that is paid for, so I guess its time to get rid of my iphone plan.

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