What does the error "iTunes could not restore the iPod 'NAME' because the backup could not be saved on the computer." mean?
I hopefully have a solution to this issue. I also had this problem, and I believe it's because you have insuffient disk space and iTunes being a large program requires so much disk space to be available in order to perform these tasks.

Therefore, iTunes will bring up the error after reaching 2/3 of the way and then the error appears: "iTunes could not restore the iPod/iphone 'NAME' because the backup could not be saved on the computer." The backup you did is there because you're obviously selecting it when "restoring from backup". So free up some disk space and redo the "restore from backup" and it should complete the process without any errors.