To me the easiest way to restore is like this

a) Download Ziphone to your computer (from download.ziphone.org)
b) Start the ZIPhone GUI
c) Go to Advanced Features
d) Look at Change Phone Mode, Press DFU mode to put your iphone into DFU mode
e) Download the firmware you need. I use http://www.versiontracker.com/dyn/moreinfo/macosx/32939 to download firmware 1.1.4
f) Start Itune. Hold Shift when pressing the "Restore" button.
g) Select the firmware you just downloaded.

that's it.