Just one way of fixing it - PC, Windows XP / Vista
Ok guys, if iTunes won't restore your iPhone3G/iTouch2G to the original/custom firmware, due to an error while starting, just stick to the following:
INSTRUCTIONS FOR WINDOWS XP/VISTA:

1. Set your iPod on DFU mode by holding the Power and Menu buttons (both at the same time) for 10 seconds, (use your watch, or something

), then release the power button but KEEP HOLDING menu for another 5 seconds.

2. Plug your iPod to the PC using the usb cable.

3. Use the BootHelper/1ClickBoot application to restart your iPod*
http://www.ipodtouchfans.com/forums/showthread.php?t=139115&page=22
Remember to kill "iPod Service" and "Apple Mobile Device Service"

4. Run iTunes, select your iPod and SHIFT CLICK on Restore if you want to restore using a CUSTOM FW, or just click on restore for the original 2.2.1fw.

5. Sit back and relax as it takes a while (about 5min, for real!!, just chill out and wait...)

6. That's prety much it, if you guys have any question just IM me on shuldden AT hot... dot com

I'm too lazy to try this out on a MAC, but if you guys know of any application to do the same, please post, thx!!
*Even if your iPod gets stuck on the Apple Logo and doesn't go any further, that's good enought for the iTunes to recognize the iPod and restore it to any firmware we want. Don't worry, t
here is NO WAY your iPod can get bricked to a point of no return... you can ALWAYS recover it following this steps 
- as long as you have battery on it, LOL
