Make sure hosts file isn't set to use cydia as the apple update server
This fixed my problem.
You go into the iTunes syshost file, open it with a text editor and delete the IP address for CYDIA at the very end.
(I didn't even put Apple's IP in there - iTunes does it automatically if it doesn't see any other address)
Save it, close out and then run the restore or upgrade. Should work then.
I don't recall the exact directory of the file though - different OS's have different locations for it. And it was in a hidden file too - show make sure you show hidden files when looking for it.
I think it's something like in here:
C:\Windows\System32\ drivers\etc\hosts
Depending on your Windows OS. (Not sure about Mac OS)
EDIT: It'll look something liek this in a Text editor (Open with WordPad)
A standard Windows hosts file should look something like this -
# Copyright (c) 1993-1999 Microsoft Corp.
#
# This is a sample HOSTS file used by Microsoft TCP/IP for Windows.
#
# This file contains the mappings of IP addresses to host names. Each
# entry should be kept on an individual line. The IP address should
# be placed in the first column followed by the corresponding host name.
# The IP address and the host name should be separated by at least one
# space.
#
# Additionally, comments (such as these) may be inserted on individual
# lines or following the machine name denoted by a '#' symbol.
#
# For example:
#
# 102.54.94.97 rhino.acme.com # source server
# 38.25.63.10 x.acme.com # x client host
127.0.0.1 localhost
---If you see an IP address at the bottom there with CYDIA or SAURIK in it, delete that whole line and re-save the file. Don't change anything else.
