When i try to upgrade iOS to 5,x i get two different errors: 1603 trying normal update, 1604 when trying using dfu mode.
Wheb i try to restore back to my current firmware i get 3194. I have tried all the suggestions about messing with the host file.
Take a look at this thread: http://www.ipadforums.net/jailbreaking-hacking-tutorials-how-guides/52863-tutorial-failsafe-method-restore-current-version-ios.html
If you follow each step exactly and you still can't restore your iPad - then, yes, I am afraid you probably have a hardware fault and you will have to replace that iPad.