Hi people I am from India. I have a iPhone 4 and I have the same issue as every one does. Cant install iOS 5. So please try this
1. Install newest version of iTunes while do not connect your iPhone, iPod or iPad yet.
Once installed, run new iTunes for a while then close it.
2. Windows users simply go to folder
C
Documents and Settings\Application Data\Apple Computer\iTunes\iPhone Software Updates (replacing C: with the appropriate drive letter)
3. Mac users need to locate it.
Cut and paste files there to somewhere else.
4. Do not delete them in case the steps does not work for you, you can still copy them back to the folder. You can find out your username by pressing Ctrl+Alt+Del.
5. Put your iPhone into DFU Mode, i.e, Recover Mode
Finally, proceed with iOS 5 restore procedure