trying to update to 2.0.2 iTunes wont recognise phone has been restored iPhone

I decided to take the risk and update to 2.0.2 the day before yesterday and it stopped half way with an error. My phone was then stuck on the connect to itunes screen with iTunes refusing to recognise the phone.
I did a DFU restore as thats the only thing left to try and after 6 hours and after appearing like it had totally crashed on the iphone it is restored and the iphone appears to be both updated to 2.0.2 and everythings on there including all my settings...
The problem is when I plug it into iTunes it asks me if I want to set it up as a new phone or restore it from the backup (which is now dated after the restore was finished)..
Ive gone through this now 3 times and no matter what it just keep going back to that screen as if it never restored the phone. How do I get itunes to recognise the phone and let me put my songs, etc. back on?
After having been plagued with problems with apps crashing and having my phone brick itself daily Im really not getting a good impression of the new phone and I personally dont recommend you buy one if your thinking about it:
http://discussions.apple.com/thread.jspa?threadID=1600894&tstart=0
http://discussions.apple.com/thread.jspa?threadID=1676330&tstart=45
iPhone 3g