If that doesn't work shut the phone off and put it into DFU yourself - have iTunes open turn the phone off then hold the home button while you connect to the computer. Then iTunes will recognize a phone in restore mode and hopefully you won't fail.
I'm having same issue and yes Im familiar with DFU Mode. My iPhone 3G S gets 3004 error when I try to restore it in DFU mode or regular Restore mode and now It wont go back to normal phone. Its stuck in Restore mode. Any ideas? (Besides take it back to Apple)
Please provide a little more information. At what point exactly in the restore process do you get the error? PC or Mac? iTunes version?
Try deleting the ipsw file (maybe it's a corrupt file?) and then restoring again. iTunes will automatically redownload it after you delete it and then restore to factory settings.
Here's where the file is located. On Windows:
Documents and Settings\<User>\Application Data\Apple Computer\iTunes\iPhone Software Updates On Mac:
~/Library/iTunes/iPhone Software Updates