I had a similar problem. What bootloader are you on?
Press (Power+Note Key+Reset) to get into bootloader mode
If 2.04 or 2.05, downgrade to 2.02, using
http://forum.ppcgeeks.com/showthread.php?t=7820
it was a bit tricky to get everything working, but i figured it out, if you run into trouble let me know.
FYI: i too have vista, found it easier to fix on XP machine.
FYI2: My phone would even go into bootloader mode and thought it had bricked it, but this fixed it.