rubberchicken, as several people have stated, it returns to the unalphabetized state once you add any new music to the iPhone.
I posted on Saturday, February 25th that a supervisor told me he would give me a return call "in a few days" after speaking to an iOS software engineer. Well, I waited a week until Saturday, March 3rd and never received the call.
I called them and spoke to another supervisor. The guy was really nice and understood that in addition to wanting to know when this bug would be fixed, I also wanted to help in any way possible, including doing some troubleshooting. The reason I would want to do that is because it seems apparent to me that Apple has no clue about this bug.
So the guy asks me to create a new iTunes library. I do so. I add about 1,110 songs to it (not my full collection). I get off the phone with him at this point, because we had been on the phone for an hour and a half. All I needed to do at this point was wait until it synced, see if it was alphabetized, and if so add new music to the iPhone and see it remains alphabetized.
I honestly couldn't believe what happened next. A new issue was created that I had never even heard of before. The vast majority of my songs were grayed out. I couldn't play them. Here's a thread regarding the issue: https://discussions.apple.com/thread/3376325?start=0&tstart=0
I tried every possible solution to no avail to fix these grayed out songs. I couldn't even get these grayed out songs off my iPhone. I unchecked Sync Music and then synced. Nope. I checked "Manually Manage Music" and synced. Nope. I had to do a full restore to fix the new problem. At least my music is alphabetized now -- until I add new music. Sigh.
I emailed the supervisor that I spoke to on Saturday, March 3rd regarding what all I went through after we got off the phone. Yet to receive a response in five days.
As some have suggested, what is it that makes us special? I think we need to collect some information.
Are you using iTunes Match? (No.)
How old is your iTunes library? (Four years.)
How much space is left on your iOS device? (2.3 GB)
How many songs are on your iOS device? (2,822)
About how many albums contain album art? (Every album for me.)
If anyone can think of more relevant information, feel free to include it. We need to collect information and see where our similarities lie.
I will remain in contact with Apple. Not going to give up on this one.