iPhone 2.1 - unknown application 0xE800002E - A FIX!

Update 11/24/08: With the iPhone 2.2 update I at first thought Apple had broken this in a new way, but I've also read reports that the bug has finally been fixed with iTunes 8.02 and iPhone 2.1. I'm now inclined to give Apple the benefit of the doubt, but do proceed with caution.

The bug that's been plaguing many iPhone users was not fixed with 2.1:

Gordon's Tech: iPhone application update error not resolved: don't buy your iPhone until it's fixed: "Unknown Error: 0xE800002E"

So the bad news is that Apple didn't fix the problem.

The good news is that after installing 2.1 and iTunes 8 there is indeed a fix. It works under 10.4.11 and it kept working when I upgraded to 10.5.4.

1. Upgrade to iTunes 8 and iPhone 2.1
2. Sync iPhone so you have a backup (I make a zip of my backup directory)
3. Restore iPhone to original state using the restore button on the info (a commentor says it's the summary tab) tab. This wipes the phone.
4. When the phone mounts iTunes will ask if you want to treat it as a new phone, or restore from backup.
5. Choose restore from backup. This doesn't restore everything -- but don't worry.
6. Sync (this will take a while if there's music involved) - this restores the rest.

When all is done everything should be in place. In the past the restores still left me with a lot of cleanup, but this time I only had to arrange a few icons. My passwords were largely restored, I did have to reenter my Gmail un/pw.

How do I know this solved the problem?

1. When I did this iTunes said I had no updates. The App Store on the iPhone said I had 4 updates. I actually used the App Store to apply the updates -- a process that has NEVER worked in the past and has caused many problems for most users. This time it smoothly applied the updates, and when it was done it said there were no more left.
2. Since applying the fix I have applied an app update from iTunes.
   

I assume this problem arose from one or more of:

1. DRM schemes that don't handle changes in iPhone ID when there's a restore from backup (maybe fixed in 2.1)
   
2. A permission or keychain problem arising from an OS X bug (because I've seen something similar on the desktop that breaks updates.

P.S. I need to credit a Mall of America Apple Store "genius". He thought this would work, though that was prior to 2.1. I think it really needed iPhone 2.1 and iTunes 8 to work and stay working.

Update 9/18/08: Based on the comments I can add

• It's working very well for everyone. Cookies, game scores, etc are saved.
• The icon order is not preserved -- you have to reorder your icons. I ran into this myself but only a small number were disordered. In some cases they're restored in alphabetic order. This is pretty easy to do of course.

Update 11/9/08: A commenter suggests doing a 2nd 'restore' to restore icon ordering:

...if you restore a *second* time, after the sync step, then all your icons and placements will be as they were prior to the restore.

My icon rearrangements weren't too bad, so, for myself, I'd choose to do some post-restore manual correction. If you're feeling brave and try this, please add a comment so we can see if it works for people for whom icon order restoration would be a big job.