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When you are trying to add your apple account are you tapping on new account?
You need select existing account and add your information. If you tap new you will get the message that that your account is in use.
Is that when you get apple account in use?
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On your iPad when going through the setup process it will prompt you to restore from iCloud not backup.
Restart your iPad and start over. Press and hold the power button until slide to power off shows up. Then turn it back on and try it again.
How did you make out?