I've been unable to upgrade to the latest 4.2 GMb (I'm running 3.2.2). I first tried doing Option+Update, selecting the 4.2 IPSW, and letting it proceed. The update is installed, but when the iPad reboots to reconnect to ITunes the gray progress bar freezes 3/4 of the way through. It continues to freeze if I try to reboot it regardless of whether it is connected to the computer or not.
I put it in recovery mode and restored to my old backup, which reverted to the 3.2.2 firmware. I then tried to option+restore to 4.2 instead of update, but had a similar problem - the restore worked, but when I was prompted to set it up as a new iPad or restore settings from a previous backup, I chose the previous backup so I don't lose all my stuff. It loaded, but once again froze after rebooting at the gray progress bar.
I'm on OS 10.6.5 and iTunes 10.1. What's going wrong here?