try this it worked for me
1.Don't Uninstall and Reinstall iTunes!!! Most of the instructions I found told me to do that, I never had to.
2.If iTunes is open, shut it down
3.Connect your iPhone to your computer via the supplied USB cable.
4.Open up Windows Explorer and navigate to the following directory.C

Documents and Settings\**YOUR USERNAME HERE**\Application Data\Apple Computer\iTunes\iPhone Software Updates. Be sure to replace your username with the appropriate directory. If you can't find the Apple Computer\iTunes folder, you are probably in the wrong users directory.
5.If you've received the 1604 error, you would have already downloaded the iPhone 1.1.3/4 update. There should be a 150Mb file in the iPhone Software Updates folder that contains the update.
6.Double click that file. iTunes will open, and it should begin the process of updating your iPhone into working condition