I just spoke with an Apple Support Rep. since I have the same issues on my Gen 1 iphone (after upgrading to 2.0) and on the new 3G Iphone.
The rep thinks its a corrupt 2.0 update or possibly a corrupt hardware.
Strange that so many people had the same updates with a corrupt file. 🙂 nonetheless, its not an update that you do, rather a full RESTORE. But before you do this make sure you backup your photos and your contacts, as it will delete it. Yeah, I lost all most contacts on my iphone when I updated to 2.0, *****!
Do a full restore and not a restore from your backups.
Instructions are here >>> (Updated URL)
http://support.apple.com/kb/HT1414?viewlocale=en_US
Will let you know if this worked or not.
Good luck!!!!
Message was edited by: RaptorM3