Hey All... Update ! ! ! My problem is now resolved
I found that the more I did to try to resolve my issue the closer I came to losing all of my movies, music, and podcasts - not to mention my contacts....... So. There is another discussion on the forum about my iPhone 4 not backing up to iTunes version 10. The final solution was to follow the instructions to REMOVE all Apple Software using the procedure shown in this support area. Its not just iTunes that needs to be removed..... all apple software needs to be COMPLETELY removed. (I also deleted the backup folder as discussed above.)
Then, once you have successfully removed all APPLE software, you install iTunes from scratch. After the installation, plug in your iPhone and TRANSFER all purchases to iTunes. Then do a right click on your iPhone and perform a backup. The sync should not actually move anything because none of the options are checked. Once you are sure that you have all of your "stuff" in itunes, you will go to your iPhone tabs and start checking off to sync your contacts, music, movies, podcasts, books, etc.... Each time you do this you will get a warning about erasing all on your iphone and replacing it with whats in your new iTunes account. As long as you are sure that everying is showing properly in the iTunes list, click on the APPLY button and then Sync *if it doesn't already start).
Backup and full sync works for me now......
It seems like a solid SHOTGUN resoluton (since we dont really know which part of the APPLE software suite became corrupted), however it worked for me. Hope it does for you, too.
R