I was able to fix this for ALL my devices but this is what I had to do.
1) delete ALL Music from my "i" device. (iPad2 and iPhone4)
2) do not connect "i" device to computer but open iTunes.
3) delete any custom playlists inside of iTunes. (I left the default ones.)
4) backup your music inside of iTunes. (I technically already had a backup since I set iTunes to copy the music from the folder I had it in to the folder iTunes uses.)
5) delete ALL Music from inside of iTunes.
6) have iTunes import your library of music from your backup/folder. (I set mine to copy those music files into the iTunes folder structure like I had set in the past. Good way to have a backup.) Note this will take a long time 2-4 hrs.
7) now connect your "i" device to your computer and have it sync. Note this will take a long time 2-4 hrs.
8) once the syncing was complete my music playing worked just fine on ALL my "i" devices.
9) recreate your custom playlists.
NOTE: inside of iTunes for my "i" devices I have the preference set to convert the music from iTunes to my "i" devices using 128Kbps AAC or something like that. I do that to save space on my "i" devices because most of my music is MP3 320Kbps files which are big.
I hope this helps someone else experiencing this problem. Yes I know this is not an ideal workaround because of the time it takes etc. But it does work. ALL my music plays now on ALL "i" devices.