Apple has posted a Knowledge Base article addressing an issue where users receive the error message:
"Error -48 itunes unable to download your update at this time check network connection or settings."
when attempting to restore iPhones in iTunes. The solution, according to Apple, is to delete the iPhone software updates from your system then repeat the restore process, forcing them to be re-downloaded.
Under Mac OS X, these files are located at: ~/Library/iTunes/iPhone Software Updates/
Under Windows Vista, these files are located at: C:/users/[yourusername]/AppData/Roaming/Apple Computer/iTunes/iPhone Software Updates
Under Windows XP, these files are located at: C:/documents and settings/[yourusername]/Application Data/Apple Computer/iTunes/iPhone Software Updates
Apple says that users should remove all files in the iPhone Software Updates directory, then re-attempt the restore from within iTunes.