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After iPhone 2.0 upgrade, Stuck in Recovery Mode

iTunes shows I've upgraded to the latest iPhone firmware (presumably 2.0 although the version indicator says n/a. However, I get an error message that says "iTunes has detected and iPhone in recovery mode. You must restore this iPhone before it can be used with iTunes.
If I try to Restore again, or Option>Restore it eventually brings me back to the same error. In brief, I think I have iPhone 2.0 installed, I just can't restore my phone.
 
indifferent I’m perplexed.
Inappropriate?
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