Dismiss the "Edit Home screen" on iPhone 3G running 3.1.3

Hi Gurus...Here is some back ground before I ask you for your help. First, I'm an iPhone novice . My wife has this iPhone 3G. She recently forgot her password. So, the only way to get the iPhone was to restore it. But the PC which has the backup was recently reinstalled and the backup was gone. The new version of iTunes was installed on this PC and when she restored it, it installed 3.1.3 firmware. Now, after the bootup, we get the Earth screen and the slider to unlock. But when I slide the slider, I get this "Edit Home screen" message with a "Dismiss" button. But this screen is not going away when I press the Dismiss button. I can see the Apps in the backgound, but the Edit home screen message is not going away.

I tried to downgrade to 3.1.2, but I got the Error 1015 during the restore process.

Any help with making this phone work is greatly appreciated. Let me know if you need any additional info to help me.

I think(???) I did a DFU mode recovery. But I'm not sure. I did get the pop-up window saying "iTunes has detected an iPhone in recovery mode. You must restore this iPhone before it can be used with iTunes". And I then did a SHIFT + click the restore button and used an ipsw file for 3.1.2 iphone firmware which I downloaded from http://www.felixbruns.de/iPod/firmware/ . But after sometime I got the Error 1015 during restore. So, I had to restore it back to 3.1.3 firmware.

Yep. I still get the "Edit Home screen" which I cannot dismiss.