restore the phone, at my first try upgrade didn't work, it said " iPhone could not be updated", Then i restored it, it restored software 1.0.1 after downloading it from iTunes, I had a backup of my phone so it activated immediately. Try restoring it.
to make it detectable in iTunes if its corrupted hold HOME + Power/Standby for 30 secs, until " Connect to iTunes " is displayed, this is recovery mode , iTunes will detect it and restore it