I had the same problem today on my 3G... Spent hours rebooting/ respringing with no luck. Finally d/l and restored 4.01 firmware... Used Jailbreakme.com to rejailbreak. Then of course I had to reinstall all my Apple/ JB apps. If you can restore to 4.01 you can j/b, 4.1 wont allow you to j/b.anyone experiencing this? its been like over 10mins now and the upgrade is still at the middle part...
i did reinstall the itunes 10 then i had an error 1004 probably because of my hosts. but i have a recboot so it did the job.