I had this error sometime ago. It is AN EASY FIX. First of all. RESTORE the iphone to 1.1.2. After you get the error (1604 or whichever it is) RESTART your PC.
Before your PC boots up unplugg the iPhone. Once your PC restarts, OPEN iTunes. Once iTunes is open CONNECT your iPhone and click again RESTORE.
That should defenitly kick you out of your problem.
I know it did with mine and I was in an even worse situation than you (I did this to an AppleCare Service iPhone) so imagine that.
Now after you update to 1.1.2 and if you still wish to go back to 1.1.1 FOLLOW the instructions on the thread "Jailbreaking iPhone 1.1.2 - A n00bs guide" found here in this same Forum