Dalmanac, I hear you. I record all of my plays to a database, and iOS5 has broken that for me. Quite frustrating.
I've done a bunch of testing tonight, a bit more thoroughly than I did on the weekend. There are two scenarios where I appear to be able to get the phone to sync plays back the the library.
Play a song from the iPhone through iTunes:
1. Connect iPhone.
2. Play song through iTunes, but from iPhone.
2.1 iTunes briefly says "updating files on phone" or something such
2.2 iPhone count increases (viewable in iTunes)
3. Click on Music Library -> play count has not updated
4. Sync iPhone -> play count in Music Library updates
This implies to me that syncing from the iPhone on iOS5 CAN work. The functionality is there, just broken.
Repeating those steps, but playing the song on the phone, not iTunes sees the iPhone count update, but not Music Library.
Starting a fresh library (yeah, I know, I don't want to do that either) and leaving the phone in Automatic mode appears to sync plays from the iPhone when played from the iPhone. I just tested with one track, but it seems to work without issue.
Starting a fresh library and using Manually Manage Music does not work, or at least I can't get it to. It behaves the same as keeping the existing library in manual mode. iPhone count updates, library count doesn't.
The last thing I want to do is start a new library and turn off Manually Manage Music. For the time being I've changed my database import from reading the music library XML to exporting a playlist from the phone of the day's plays (including play date and count) and importing from that. At least for a bit to see if this gets syncing issue fixed - or if I can find the magic combination of making it work again with my existing music library in manual mode.
If anyone learns anything further about how to get it working or has any further diagnosis please post.