Gave up
I had to try and downgrade to a previous version of iTunes so I could upgrade a first generation iTouch given to me by my wife. It was collecting dust. I discovered it was iOs 2.2 and 3 was available. I purchased the upgrade on my macbook pro and kept getting the "check network connection" error. I had read that it was a problem with iTunes 10.5, and earlier versions should install without fail. Problem: Lion will not allow you to modify or delete iTunes due to it being an integral part of the OS. Bummer.
Solution: Head upstairs and crank up the Windows computer running iTunes 10.0 and do it from there. Windows to the rescue! :-(
Bill Gates 1 Apple 0
Mixed feelings. Great that I can now download essential apps to my iTouch 1st gen, but sad that Apple hasn't been able to figure out a way to fix 10.5 to work with their support web pages.
I suspect, as has been posted in places, that this is quite a low priority for them. Ironic as this was a charge leveled (and quite true as well) at Google for failing to adequately upgrade their older products, while Apple was given high marks for having available the latest OS upgrades for all their products. True as far as availability goes, but being able to access it is quite a different story. I hope this changes soon.