I am also having this problem, ...with 19GB's of music, ..and I am a programmer so i promise you, like above, we have been through ALL of the basic steps.
This is a bug because iTunes has removed the playlists, but it is as if the music is not longer associated with the playlists, ..so when it thinks it is removing ALL music it is only removing the plylists and leaving the files, ...but, iTunes thinks it IS removing the music (or supposed to be) hence the bar drops down to indicate new space, ...but when the sync is finished it does a little check on space, ..and oh surprise, ..it is full so it pops back up.
Am I seriously going to have to manually delete 4000 songs from my iphone. !!
'cmon Apple, .acknowledge the bug.
..and anyone else who is about to suggest ticking or unticking ANYHTING in iTunes, ..please read this thread in full first !!