If you search the phorums the same thing has been reported about hundreds of times. Mostly no solution. If there is any then by some lucky coincidence or in few cases the case was solved physically (USB repaired) in Nokia Care.
I had the same problem with an 1 month old Nokia 700, brought it to Nokia Care in Germany where they said that it has been caused by water damage by USB plug - indeed there was some corrosion. Which I find totally confusing - the phone was held very carefully, definitely not exposed to water or smth. And it cannot logically come from the condensation as well - why the only in this place? If it could be true then it would prevent going in and out with your phone with temperature difference more than 10 degrees celsius which is total nonsense OR the phone has serious construction fault OR I was sold already a faulty phone.
Anyway- I was told that warranty is void and only the exchange of whole plate (which costs as muc as the whole phone) would help. Now I'm arguing with Nokia.
I have to say - I'm really disappointed about the attitude of N 
Has anybody had something similar?
Try these:
It is normal that the phone loses connection during the reboot phase. If you wait for a while it will automatically reconnect to your PC. If you lose connection during the backup, installation or restore phase, please do the following:
- Disconnect the USB cable from your phone
- Press your phone’s power button for about 10 seconds
- Reconnect the USB cable
- Wait for the installation to continue
Note: If this doesn’t solve your issues, try to connect your phone to another USB port on your laptop or to a USB port on the backside of your desktop PC. In some cases rebooting the computer also helps or using another PC to do the update.
Try also this:
- Right click the Nokia Suite shortcut icon.
- Then click Run as administrator.
- Then continue your update.
If above does not help reinstall the Nokia Connectivity Cable Driver or Nokia Suite.
