When doing the iPhone restore, iTunes checks if there’s the latest image file in user’s update folder, if it can’t find such an image file, it will try to download it from Apple.
Since downloading through iTunes is pretty slow for me (link issue), I have managed to fetch it manually using the download manager, then put the it into
~/Library/iTunes/iPhone Software Updates
folder. iTunes starts restoring immediately after I click on the restore button.
UPDATE: If you’re on Windows, the destination folder is:
C:\Documents and Settings\<your login name>\Application Data\Apple Computer\iTunes\iPhone Software Updates