have done some searching for this( have had my own dramas)... some theories are that the software you have downloaded was corrupt or interrupted whilst downloading .or has it been jailbroken?
you can try downloading an old ipsw from your itunes library instead of trying to upgrade as apple only allow the latest version (iOS 4.0.2??)and this may be why error 29 occurs.
try the oldest version you had for your phone (basically giving it it's original os back)
fingers crossed!