Is Unknown Error 23 a hardware failure or a comm failure?

My wife and I recently upgraded to iPhone 5s (and Verizon). For Christmas, we gave our son my wife's old iPhone 4 to use as an iPod touch. I noticed it was having trouble holding a charge, then it went into constant restart mode - Apple logo ... blank screen ... Apple logo.

I assumed the battery had died, ordered a new one and replaced it. But when I try to restore the phone, I get the dreaded "An unknown error (23) occurred."

On some threads, people say this means a hardware failure, but elsewhere I've seen that 23 supposedly refers to a comm issue.

So my question is this: Could it have something to do with trying to restore a deactivated phone? I tried taking the sim card out, but that didn't change anything. I've tried on two different computers with the same result.

Do I need to tell my 8-year-old son the "new" iPhone he just got is hosed?