Yea, so you updated to 2.0.2 and hooked up to iTunes. Everything seemed to be goign well you thought. It found your backup and asked you to restore it. Phew, you won’t have to reenter your contacts so you’re happy. Your restore your backup its working.
Later you hook up to iTunes to add some songs and it is asking you again, do you want ot restore your backup or set up as a new phone. What the heck? Didn’t we already do this? This seems to be happening to lots of folks. The solution is simple.
To solve this, after you do your initial backup restore, just set up the phone as new. It shouldn’t ask you again after this. You won’t lose your contacts either because you already synced them on from the first backup restore.
Update: User haseebh2O has offered another solution. Uninstall iTunes, restart the PC, install iTunes 7.7, restore your backup again. It should stop asking.