I'm going to raise the spectre of heresy, but has anyone seen this problem when updating via windows? All of the posts here, that mention an OS, talk about OS X.
Edit 1: never mind: I see that macsidy has problems on windows.
I'm using win7 x64 to update my 32GB 3GS and, while I'm still waiting for the music and videos to be restored, the base OS5 firmware upgrade worked (version 5.0 (9A334)).
(So far, the entire upgrade process is now around 2 hours and counting. Restoring the apps took over an hour, and restoring the music/videos will probably take another 30-45 minutes. I hope there isn't much to restore after that.)
Edit 2: Upgrade complete, no problems. It did take around 2.5 hours, though.