sorry digi , i missed your post, What isthe error code its throwing at you digi, ? if itunes wont update a few things you can do , manually update to the latest fw , goto
HERE and download the latest fw for your device , the latest fw is 4.2.1 i think for your device which is jail breakable anyway, [download in google chrome or firefox] right file format [ipsw] not rar file, once downloaded open itunes , as you hit restore in itunes hit the shift key at the same time and , a windows prompt box will show up , browse to your downloaded ipsw file , and restore that way , hope you havent set your windows host fil , so that wont be the problem, so its either usb lead , usb port, or the wrong itunes
hopefully that will sort ya problem out
below is how you put your ipod into dfu mode mate
etting your iPod Touch/iPhone into DFU mode is somewhat tricky, and it may require some patience/practice because timing is essential to get it to DFU mode and not into recovery mode.
1. First, Open up iTunes, plug in your iPod Touch/iPhone to the CPU's USB port. Turn on your CPU's speaker and make sure it is loud enough that you can hear it.
2. Hold down the Home button (top left for iPod Touch and top right for the iPhone with the screen facing you) and the Power button (located on the front bottom of your iPod Touch/iPhone) simutaneously, until the screen goes black and the device turns off. (past the red slider/slide to power off screen)
3. Now let go of the Power button, but continue to hold the Home button. Your iPod Touch/iPhone should have turned off and the screen should not be on.
4. After around ~10-20 seconds, you will hear a noise (beep/ding) from your CPU as if it had just recognized a new hardware device, now iTunes should recognize it in DFU mode.
5. After iTunes recognizes the iPod Touch/iPhone, let go of the Home button otherwise it will go into recovery mode and you will have to do the entire DFU process over again.
6. You will know when you have put your iPod Touch/iPhone correctly into DFU mode when the display is blank and that you do not have anything on your device.