On my wife's phone we're getting error 1002 after performing a restore through iTunes. We've been in the same situation a few months back and since then she chose not to do any updates anymore. But yesterday she accidentally accepted an update and now we're in the same situation.
I believe last time I was able to make it boot correctly by making it exit recovery mode using tiny umbrella, but this does not work now.
The phone has never been jailbroken or rooted or anything like that.
Things I have already tried but didn't help:

• Using a different usb cable
• Doing the restore from another pc
• Remove all apple software, reinstall itunes and do the restore
• Put the phone into DFU mode and perform the restore

In most posts I've read about error 1002 it is suggested that it's a hardware problem and you should throw away your phone, but I doubt this is the case here, since we've had it before and were able to fix it then.

Info:

• Itunes 10.4.1.10
• IOs version: iPhone2,1_4.3.5_8L1_Restore.ipsw is what's beeing installed now. Idon't know what was on it before, sorry. Bust be a version that was beeing pushed by apple in January.
• Platform: Windows 7
• Restore log: IPhone Restore error 1002 - Pastebin.com
• I also found a restore log from January on my wife's pc: Iphone Restore Error 1002 (jan/2011) - Pastebin.com

Well you don't have "corrupted stack" so, *maybe*

Do you have any saved SHSH blobs for your wife's phone? A SHSH blob for iOS 4.3.5 is pretty useless for fixing this issue.

Suggestion #1
Use FixRecovery (a separate tool available for download from the same website as TinyUmbrella)

Suggestion #2
You make a custom IPSW that doesn't jailbreak but does bypass the baseband update process. This is a *non-standard* custom IPSW and you cannot just use the stock PwnageTool or Sn0wbreeze to do this. I've seen such pwnagetool bundles published in the past, but no one has bothered to make one for 4.3.5