Thanks for the question, and great troubleshooting thus far. You’ve already completed half of the work by isolating the issue to Photo Syncing. To pick back up, and potentially resolve the issue, follow these steps:
If you encounter any of the above issues or another issue while syncing photos, try the following:
1. Ensure that you are syncing the device with the computer with which you normally sync photos.
2. Within iTunes, select the device, then select the Photos pane and turn off Photo syncing.
3. Sync your device.
Important: This will remove all synced photos from your device.
4. Disconnect your device and update to the latest version of iTunes.
5. Remove your iPod photo cache.
6. Connect your device to iTunes.
7. Select the device, then select the Photos pane and turn on Photo syncing.
8. Sync your device.
If you still see an alert that there is not enough space to sync your entire photo library, selectively add photo albums until the device is full.