I had the same problem to sync my photos. The issue happened whenever "Sync Photos from": "iPhoto" was checked
I was able to sync after this workaround, in Photos "tab":
Select "Selected albums, Events, and Faces, and automatically include": "no Events".
("Include videos" was checked, in my case)
In the "Events" group, I checked a few albums (from 1 up to 10 at a time), and clicked "Apply".
After several syncs, all my photos were copied to my iPhone 3GS.
My idea is that the sync has some kind of timeout, and if too many photos are synced at once, the time expires causing the problem. I have noticed that the syncing icon in iPhone disappears after some time when synching too many photos.
I also noticed, in Activity Monitor, that there is a huge increment in the network downlink when the photos start syncing. (I am synching via USB). Maybe this is because my photos are storied in a NAS drive, but I supposed iPhoto kept the thumbnails (iPod Photo Cache) in my local driver with the iPhoto Library. I dont know if this is right.