Won't set up after restore (iPhone original)

Hey guys,
I've got an original iphone that when unresponsive last night.  Nothing worked, it just froze up.  Even a reset was unresponsive (holding the home and sleep buttons to get it to reboot).  So I plugged it into my computer (windows 7 64 bit with itunes 10.5) and performed a restore.  The restore gave me an error message, saying the device couldn't be restored.  I did some googling and found a trick that if you hold the home and sleep button and get the phone to shut down, you can then close itunes, re open itunes, and plug your phone back in and get itunes to recognize the device in restore mode.  So I did that, and then it restored propperly.  Now it's got the default itunes, arrow and usb screen up.  Everytime I plug it into itunes, itunes recognizes the iphone, but it won't connect to the itunes store.  I (sometimes) get an error message saying the network connection timed out, other times nothing happens -- the progress bar goes gray for a second and then I get an empty iPhone screen in itunes.
I've tried uninstalling and reinstalling itunes -- no dice
I've tried stopping and starting the apple mobile device service -- no dice
I am not having any other network or connectivity issues, I can access the itunes store through itunes on my computer just fine.
Apple network diagnostics all check out:
Microsoft Windows 7 x64 Business Edition Service Pack 1 (Build 7601)
System manufacturer System Product Name
iTunes 10.5.0.142
QuickTime not available
FairPlay 1.13.35
Apple Application Support 2.1.5
iPod Updater Library 10.0d2
CD Driver 2.2.0.1
CD Driver DLL 2.1.1.1
Apple Mobile Device 4.0.0.96
Apple Mobile Device Driver 1.57.0.0
Bonjour 3.0.0.10 (333.10)
Gracenote SDK 1.9.3.494
Gracenote MusicID 1.9.3.106
Gracenote Submit 1.9.3.136
Gracenote DSP 1.9.3.44
iTunes Serial Number 00E3B21403472188
Current user is an administrator.
The current local date and time is 2011-10-28 17:30:57.
iTunes is not running in safe mode.
WebKit accelerated compositing is enabled.
HDCP is supported.
Core Media is supported.
Video Display Information
NVIDIA, NVIDIA GeForce GTX 470
**** External Plug-ins Information ****
No external plug-ins installed.
**** Network Connectivity Tests ****
Network Adapter Information
Adapter Name:    {50642CBD-0395-4BA5-9DE5-B39823617FFE}
Description:    Microsoft Virtual WiFi Miniport Adapter
IP Address:    0.0.0.0
Subnet Mask:    0.0.0.0
Default Gateway:    0.0.0.0
DHCP Enabled:    Yes
DHCP Server:   
Lease Obtained:    Wed Dec 31 19:00:00 1969
Lease Expires:    Wed Dec 31 19:00:00 1969
DNS Servers:   
Adapter Name:    {66EB5999-B0AE-45E0-BCF9-FDB98753D981}
Description:    Atheros AR9271 Wireless Network Adapter
IP Address:    10.0.1.3
Subnet Mask:    255.255.255.0
Default Gateway:    10.0.1.1
DHCP Enabled:    Yes
DHCP Server:    10.0.1.1
Lease Obtained:    Fri Oct 28 15:58:35 2011
Lease Expires:    Fri Oct 28 19:58:35 2011
DNS Servers:    10.0.1.1
Adapter Name:    {810EE60D-A94D-4F10-B185-C97555C20B0D}
Description:    Realtek PCIe GBE Family Controller
IP Address:    0.0.0.0
Subnet Mask:    0.0.0.0
Default Gateway:    0.0.0.0
DHCP Enabled:    Yes
DHCP Server:   
Lease Obtained:    Wed Dec 31 19:00:00 1969
Lease Expires:    Wed Dec 31 19:00:00 1969
DNS Servers:   
Active Connection:    LAN Connection
Connected:    Yes
Online:        Yes
Using Modem:    No
Using LAN:    Yes
Using Proxy:    No
SSL 3.0 Support:    Enabled
TLS 1.0 Support:    Enabled
Firewall Information
Windows Firewall is on.
iTunes is NOT enabled in Windows Firewall.
Connection attempt to Apple web site was successful.
Connection attempt to browsing iTunes Store was successful.
Connection attempt to purchasing from iTunes Store was successful.
Connection attempt to iPhone activation server was successful.
Connection attempt to firmware update server was successful.
Connection attempt to Gracenote server was successful.
Last successful iTunes Store access was 2011-10-28 17:06:48.
**** Device Connectivity Tests ****
iPodService 10.5.0.142 (x64) is currently running.
iTunesHelper 10.5.0.142 is currently running.
Apple Mobile Device service 3.3.0.0 is currently running.
Universal Serial Bus Controllers:
Standard Enhanced PCI to USB Host Controller.  Device is working properly.
Standard Enhanced PCI to USB Host Controller.  Device is working properly.
No FireWire (IEEE 1394) Host Controller found.
Connected Device Information:
iPhone, iPhone running firmware version 3.1.3
Serial Number:    7U741QM8WH8
Most Recent Devices Not Currently Connected:
iPad 2 running firmware version 4.3.3
Serial Number:    DN6FN6SJDKPH
**** Device Sync Tests ****
Sync tests completed successfully.
What can I try next?  Any help would be greatly appreciated!

I'm doing the exact same thing.  Iphone 2g won't connect to the itunes store.  I get an error message saying the network connection timed out, but all diagnostics are OK.  I've turned off antivirus, firewall, check ie settings, uninstalled/reinstalled itunes... nothing has worked.  Have you had any luck?  And if so, what did you do? 

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