My iPhone 3g would not upgrade to iOS 4 – hung for 2 hours “Backing Up” on my first try, and I gave up after an hour on my second try.
1) Perform a full Sync of all data and apps you want to keep.
2) Download the update via iTunes.
2) Instead of Upgrade choose Restore – you will then have the option to Upgrade and then Restore.
This wipes the 3g device clean, performs the iOS 4 upgrade and then asks to Restore all of your data. Worked like a charm just not the way it’s supposed to….
“if you are experiencing problems with your iPhone…”