Thought I'd register and help you guys because I had the same two questions.
I option-clicked Restore to install 4.0, worked like a charm, until my phone booted up. It erased everything, pictures, contacts, SMS's, etc.
After freaking out for an hour or so I figured out that you open up iTunes with your phone connected, right click on your phone in the sidebar, then click "Restore from Backup..." and choose your latest backup.
Took about 10 minutes for me, but then iTunes gave me an error 27 and said the phone didn't restore properly. After the phone booted up, it had restored EVERYTHING. All my contacts, pictures/videos, notes, SMS's, etc. are back and everything is as it was before.
Hope that helps, everything's working here except for wifi...