I bought a new Ipad (first version) and am trying to update to 4.3. I click on the "update" tab and it downloads, but after downloading I get the above error and the message "Problem downloading software for the ipad. network connection timed out. make sure your network settings are correct and your network connection is active". I have no problems with my network. Please help!

check this link out, it has to do with the version of your itunes
iTunes Store reporting error - 3259

While visiting the iTunes store, or purchasing music from it, you may receive error 3259 Windows 7. Any of the
following descriptions will appear with the error:
i "iTunes could not connect to the Store. An unknown error occurred (-3259). Make sure your network connection is
active and try again."
ii "There was an error downloading your music (-3259)"
Here are the various ways to fix error 3259 Windows 7:
Update iTunes
Turn Off your Windows Firewall
Exclude iTunes from the Data Execution Prevention
Repair the iTunes Registry Settings
Clean the System Junk
i also faced this problem many times but i fixed it, i also got some help from this article
error3259.com, hope someone might get help from this article.