What version of OS X are you running and do you have Lion capable machine? If you can run Xcode 4.3, that is the 'easy' fix for you.
I'm stuck at using Xcode 4.2 and Apple hasn't released the iOS 5.1 SDK for it. I did a hack to force it to work that I found via web searching. Not sure it is 100%.
Apparently there was a way to upgrade to intermediate version by command or control or option clicking on the iTunes upgrade button. Sorry I can't remember the details. You first download the 5.0.1 image file for your particular device. The problem is that several people have said the Apple isn't signing for 5.0.1 any more, so iTunes should fail to do the upgrade. I learned of this too late and got ****ed over upgrading my iPod to 5.1. Besides the SDK problem issues, 5.1 has these serious long weird stalls.
The biggest BS line Apple has is "Please restore the device to a version of the OS listed below". They don't let you downgrade!
This is a sensitive subject with me. I also learned that Xcode 3.2.6 does download the 5.1 SDK! So, why the hell does Apple insist on not supporting Xcode 4.2!
As far as I'm concerned, Apple should allow developers to swap out their devices to any iOS version the device supports. Hell, given my weird 5.1 stall issue, regular consumers should have the option!