Why did I pay money to upgrade the software on my Ipod touch so it would become a paperweight?

My girlfriend rarely changes the music on her Gen 1 Ipod Touch and I thought it would be a nice suprise if I payed to update the software on there for her to breath new life in an older device. To my suprise the next time she tried to change her music on her ipod it would freeze up itunes and now her phone is stuck on the connect to iTunes screen. I already tried doing the system recovery 3 times and it looks like something is happening but after the restore is complete it comes back up to the connecting to iTunes screen and won't do anything else. Other than the latest software update and changing songs occasionally nothing has been done to this device.

Restore loop (being prompted to restore again after a restore successfully completes): This issue is typically caused by out-of-date or incorrectly configured third-party security software. Please followTroubleshooting security software issues if USB troubleshooting does not resolve this issue.
Above is from:
http://support.apple.com/kb/TS3694

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