FRUSTRATING indeed!
Updated my own iP4 32GB without issue earlier today. Get home to do the wife's 16GB iP4, and Error 9. Wish I'd checked this forum earlier.
Tried the recommended "RecBoot Exit Only" link shared by Dany M (a big THANK YOU, BTW).
Worked like a CHARM. The 16GB iP4 is syncing everything back up now, and in iTunes it's showing 4.0.2.
Apple needs to get on the stick. I posted in the Apple Discussion forums too, hope they read it & figure things out. Without RecBoot, am not sure if there's a way to get out of Recovery Mode.