Here are two "fixes" suggested on the
apple support discussion boards. most said the first method didn't work.
Method one:
Phone OFF and unplugged.
Load iTunes.
Hold down the HOME button and connect the phone. Do not release the home button until 30sec after the APPLE logo appears.
Method two:
Had exactly the same problems and tried and tried. I nearly gave up when I stumbled accross another post which discussed downgrading from 3.1 to 3.0. And I found the problem and solution.
This is an extract from this article which will help you all to fix the stupid error 28!
"So, we begin: hold down the lock and menu buttons (some call these the power and home buttons) for 10 seconds, letting go of the lock button but continuing to hold menu until iTunes recognizes the device with the message: iTunes has detected an iPhone in recovery mode. You must restore this iPhone before it can be used with iTunes..
Note that, at this point, your iPhones screen should be entirely black. Many people confuse DFU with recovery (and in fact, iTunes itself glosses over this), but they are quite different. If you see anything on your screen, such as the iTunes logo and a sync cable, or a cartoon of Steve Jobs swearing in Cyrillic, you are in recovery mode and need to try again. One can find videos online that may help."
My phone's screen was never black when I did the restore and so it never worked. However, I did what he says a couple of times and managed to get this black screen and the restore worked first time!