You have tried to update iPhone firmware 1.1.3 to 1.1.4 and you got the picture above with the error text below:

The iPhone “Your-iPhone-Name-Here” could not be updated. An unknown error occurred (1602).

The solution shown here applies to iTunes on Mac running Leopard.
I believe that the new firmware requires more strict control of user privileges. The proper way to solve the problem is to login to user account owning the iPhone. When you login to new user account, open iTunes and plugin the iPhone, the message informs you about downloading and installing new firmware. Each user must have the new firmware in a file named /Users/user-name/Library/iTunes/iPhone\ Software\ Updates/iPhone1,1_1.1.4_4A102_Restore.ipsw

The simplest way is to have each user download and install the firmware. The file is large – 160 MB. If you have a lot of users, downloading is a waste of resources (time and space). The firmware update file can be downloaded once and copied to users folder. The firmware file iPhone1,1_1.1.4_4A102_Restore.ipsw must reside in /Users/user-name/Library/iTunes/iPhone\ Software\

Make sure that folder and file ownership are set to the current user.

For me the simplest way to copy files and folders between user accounts is from command line. Below are the Unix commands executed from Terminal. There are only three lines. I know you can combine them into one, but that would be cheating and complicating things. Substitute user1 and user2 with your values.

Explanation shown below.
1. (su -) switch to root user account
2. (cp -R) copy folder and its contents from user1 to user2
3. (chown -R) change permissions for the folder and its contents from user1 to user2

Unix commands shown below.
Direction of the slashes is important. Second line is long and may show here as being broken. It should be typed as one line. You can reduce size of your font untill the line has no break and copy and paste it.

Your-Mac:/ root# su -
Your-Mac:/ root# cp -R /Users/user1/Library/iTunes/iPhone\ Software\ Updates /Users/user2/Library/iTunes/
Your-Mac:/ root# chown -R user2 /Users/user2/Library/iTunes

I have upgraded four iPhones using this method. Let me know if this works for you.

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