I have the same problem
i have the proper 1.1.1 firmware file, for ipod touch. I re-name as it should be named, and when i go to restore, iTunes prepares the touch for restoration (ie wipes the touch clean), commences the restoration after extracting the firmware file and stops. iTunes declares that it could not update and encountered an unknown error (1).
I upgraded to 1.1.2, thinking i could always go back, now i am stuck in 1.1.2 world with no Jailbreak!
It sounds like a serious problem in that it does not seem to be ubiquitous, with few people suffering the error. I gathered that error 1015 was predominant (or was that just for iPhone?). But for those who are unfortunate to suffer this error, from, as far as i can gather, no fault of their own, it is very frustrating.
Anyone have any comments?