OMFG! 4 freaking hours! Apple screwed again. Same shit happened when I upgraded 1.x to 2.0. First attempt failed with error 1604 2nd attempt failed with error 1606 3rd attempt succeded and I've got virgin clean iTouch. Than 3.5 hours of reinstallation of 3Gb of apps. Since music was on manual management, all music was lost as well as one app placed on lower panel (shopping list). Now jailbreaking looks more and more attractive...
My process was seamless. 30 mins and for some reason which i can't work out none of my data was wiped during the upgrade! so i just installed the software, unplugged and off I went!