I was using Tiny Umbrella to do a 4.1 upgrade while preserving a baseband (don't need an unlock but would like it for resale eventually). So i follow the directions from here:

Update iPhone 4 on iOS 4.1 Without Upgrading 1.59.00 Baseband to 2.10.4 [Guide] | Redmond Pie

The phone starts to restore. iTunes gets to 99% "Restoring Iphone Software" and iphone's status bar gets to about 75% and just hangs there. I left it for over 20 minutes and it does not make any progress.

I tried doing the restore from DFU mode w/ the same results.

Help?

Thanks to the IRC channel. THe key was to uninstall WiFi sync.

Thanks for the info -- you're not the first person to have this problem. Apparently WiFi Sync interferes with iTunes's ability to properly restore a firmware. There was another thread in the iPhone 4 section about problems with greenp0ison that people thought were related to the jailbreak, but in actuality it was this same issue.

Thanks again for posting to let us know what the issue was!