Why is iPhone stuck in restore mode?

did you try to restore it in dfu mode ?

here is a copy of a techarena posting:

Activating iPhone "Restore mode"

1. The iPhone to your Mac / PC

2. Both buttons on the iPhone, the top (power button) and bottom (square), hold

3. Hold as long until the iPhone restarts, the glowing apple appears

4. When the apple appears release the top button

5. iPhone to iTunes icon with plug show -> restore mode

Activation of the iPhone "DFU mode"

1. The steps 1-2 above to initiate

2. Once the red slider to turn off the iPhone will continue to hold the buttons, but about 4 seconds to count (while the iPhone is "off" - black screen)

3. Button down and hold up let go (iPhone screen should still be black - no Apple logo!)

4. iTunes reports that it had (after about 5-10 seconds), the iPhone in restore mode detected (but a different mode when the iPhone screen remains black -> DFU mode.

here is another post about a possible fix:

1. Whatever firmware you are running, download the previous major version. ie if you are running 3.1.11, then download 3.0 firmware.

2. open iTunes, and restore old firmware that you just downloaded.

On a MAC 'alt / option + click restore', locate old firmware and update

On a PC 'shift + click restore', locate old firmware and update

CLICK here for the firmware