I have two iPhones 3G: one on AT&T carrier in the US and one abroad, both have this problem with Voice Memos on OS 3.1.x (OS 3.0.x worked fine with recordings longer than an hour).
Apple iPhone Product Specialist confirmed that this is not intended behavior; here is a quote from his email:
QUOTE
From: …@apple.com
Sent: Thursday, September 17, 2009
Subject: Case 136251929
Aidar,
I got a response back from my engineers. They let me know that there is no hard or soft limit put onto the iphone for voice memos. They suggested that you restore the iphones on a new user without syncing anything over to it yet and then trying it out.
I did try it on my iphone also while we were on the call and then it continued after we disconnected and mine got into an hour and some odd minutes.
Please try the restore with a new user and try the restore as new again
ENDQUOTE
The suggested solution did not help, but I think Apple Product Specialist might have used newest Apple iPhone 3GS model (with more memory onboard to accommodate possible memory leaks), while both my iPhones are older 3G model.
Today the carrier of my non-US iPhone 3G whom I contacted back in September got back to me via email, saying that they got response from the developers that this bug will be fixed in one of the future releases (unfortunately it is not fixed in 3.1.2).
At this moment it seems the only thing that could be done is to ‘vote’ for this apparently known bug of OS 3.1.x on 3G model to be fixed earlier than OS 4.0 by submitting feedback to
http://www.apple.com/feedback/iphone.html as was suggested earlier in this topic.