My issue wasn't that I had the gs.apple.com file in my hosts file.
It was that my hosts file was just too big (twss) and was causing a timeout that caused the 1013 error. I run spybot which creates a huge blacklist in the hosts file.
What I did to fix this is to save my hosts file as originalhosts, the I created a new hosts file with the following as the content:
##
# Host Database
#
# localhost is used to configure the loopback interface
# when the system is booting. Do not change this entry.
##
127.0.0.1 localhost
255.255.255.255 broadcasthost
Step 1. Start –> Programs –> Accessories
Step 2. Run Notepad or WordPad
Step 3. Click “Open..” from File menu.
Step 4. Browse to Windows/System32/drivers/etc
Step 5. In "files of type:" select all documents
Step 6. Open "hosts"
Step 7. Delete all line that has "gs.apple.com" or something like that
Step 8. Hit Save
Step 9. Restore your device
But before opening notepad, right click and select "run as administrator "
I tried restoring about 6 or 7 times and kept on getting the same error.
The reason behind that is because if you had iTunes open when you did it, it was already directing at Cydia's server. If you close iTunes, edit the host file back to normal, then open iTunes, it's pointing back to Apple servers.