"iTunes could not connect to the iPod touch because it is locked"

If you get that password message (assuming you are restoring due to a lost password), it means your iPhone unexpectedly exited the recovery mode before iTunes could download updates and start installing on your phone. When you notice your phone suddenly leave recovery mode and reboot while updates are still downloading, press and hold both buttons again and wait for it to re-enter recovery mode. iTunes will prompt you to restore again, but the download will continue from where it left off. This happened 3 times during one restore of a 3GS, and it's probably due to an automatic recovery mode time-out in phones that are password protected.

Here are the top 5 solutions you must to try in order to fix this problem http://www.unlockboot.com/2015/01/fix-it...

"After all different tries with different solutions...This now works for me:

Step#1: Clear registered devices:

Open iTunes

-> click on ""store"" in the upper left corner

-> from the drop-down menu, select ""view account""

-> enter your password

-> under ""iTunes in the Cloud"", click on the blue ""Manage Devices >""

-> remove any old devices

Step#2:

a)Make sure your device has USB connected to the device but not to the computer

b)Turn device off

c)Do the two steps ON THE SAME TIME: 1) hold home button down (don't release) 2) plug the cable to the computer

d)When you see the cable and itunes icons on your device, release you hand from the Home button

e) in iTunes application, click on restore and follow the wizard"

"I also tried all suggestions provided by Apple and kept getting the same results:

""ITunes could not connect to the ipod touch because it is locked with a passcode. You must put the passcode on the ipod before it can be used with itunes""

After multiple tries this is what worked for me:

1) Completely turned off ipod while connected to iTunes.

2) Held home button down AND USB plug at EXACTLY the same time until the USB cable and iTunes picture appears on the ipod.

3) iTunes showed the restore option

4) Performed full restore

It took me like 5 tries to get this thing working. Hope this helps."

Leaving the ipod attached and then re-entering DFU mode worked. The restore extracted and installed - timeout was the issue.