I was able to connect through the usb and open up command prompt and run adb in it.
I called adb shell nandroid-mobile.sh --restore
the next step is suppose to be a choose your backup download but I get:
nandroid-mobile v2.2.1 (milestone port)
Using G1 keyboard, enter a directory name substring and then <CR> to find matchers or just <CR> to accept default:
The milestone keyboard is not allowing anything to be entered, and I can not type anything on the cmd prompt. What am I doing wrong?
EDIT:
I've got it:
Use this
-Connect your device to your PC and Power off your phone
-Hold the CAMERA button and then press the POWER button and HOLD them both until you see the recovery screen.
-Once you see the recovery screen press the VOLUME UP button and the CAMERA button at the SAME TIME until you see a menu.
-Select 'wipe data/factory reset' and then select 'yes'
-Select 'wipe cache partition'
-Select 'apply sdcard:update.zip'
-You are now in ADBrecovery. On your PC open up a Command Prompt.
-'cd' to your Android SDK tools folder (mine is C:\android\tools)
-then type 'adb shell'
-then type 'su'
-then type 'nandroid-mobile.sh restore'
-then just hit your Enter key on your keyboard
-then hit your Enter key on your keyboard again
-let it restore the Nandroid backup
-Once it says 'Restore Done', on your Milestone select 'reboot system now'