If iTunes is not recognizing the phone, then you aren't going to be able to restore, correct?
First things first. Make sure that you do not have a firewall blocking any portion of iTunes.
If that doesn't help, then reinstall iTunes. You won't lose anything. Next connect using a different USB port than the one(s) you have previously tried.
If that still is not working, here's the only other suggestions I can offer:
If you are running Vista, see if there is an option to run the program in 32bit mode. I've heard this is possible, but really have no clue.
browse for AppleMobileDeviceService.exe and double-click to make sure that it is running. If it's not, then iTunes will NOT see your phone. The biggest thing to verify is that none of the apple services are being blocked in any way. iTunes automatically makes a call to the internet when launched, and if the phone is connected, but there is no connection to the internet, or it's been blocked via firewall, then it will error out.
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