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Having the same problem as described by several others -- upgraded iPhone 3G to 3.0, and now I get rapid flashing between the "Accessory Connected" screen and the iTunes playlist; sometimes iDrive says "Reading..." and then fails, but mostly it just says "Not Connected." And once in a great while, after a bunch of soft resets, it syncs up and works fine. Appears to be (as others have suggested) a handshaking problem, because once it works, it's rock solid.
Another thread (not necessarily related to iPhone 3.0 software) suggests starting a song on the iPhone before plugging it in. I will try it next time I'm in the car -- anyone else tried that?
Also noticed that bluetooth seems to transfer contacts fresh every time now, which makes for quite a delay when first trying to use the phone. I can live with that, but no music....
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