Yikes. Just had the same problem with my iPhone 4 that I had when trying to update my iPad 2. It got most of the way through the update process and then it just froze. I tried again (from recovery mode) and got the same result.
Since I was able to circumvent this problem on my iPad by using a different computer, I switched from my MacBook Pro to our iMac upstairs and voíla, it worked. I have no idea what’s going on, but my MacBook Pro appears to be the culprit… Hmmmm. Not sure what to make of that.