I wanted to share this for others who might come across this post with the same problem.
This fix will work for ipods/iphones/etc.
What has happened is an itunes control or preferences file has somehow gotten corrupted on your device. Why Apple hasnt built the option to do this into itunes is beyond me. In effect you may lose your music library on the device but all contacts/notes/apps/etc will be untouched and fine. Apparently Apple thinks wiping the whole thing is a better option?
First try to delete one song from your playlist, and turn off/on your device. This will hopefully overwrite the corrupt database file. Try connecting to itunes again and see if that does it.
If the above doesnt work:
1) Download/Install "i-FunBox" which gives you control of the iPhone’s file system from your computer.
2) Open i-FunBox and search for iTunesDB or iTunesCDB. They should show up in a folder, ie; /var/mobile/Media/iTunes_Control/iTunes
3) Personally, I had to rename "iTunesCDB" "iTunesContol" and "iTunesPrefs" on my iphone 4 before mine sync'd to itunes again. Its always a better idea just to rename these files incase you need to go back or restore them. If for any reason you cannot rename them, then delete them as a last resort.
DO NOT delete or rename anything other than these 3 files!!!
Keep in mind you WILL LOSE YOUR MUSIC LIBRARY. Everything else will be OK though. (contacts/notes/apps/etc)
4) Open itunes again and reconnect your device. Voila!
Alternately, if youre jailbroken, open ifile and navigate to: /var/mobile/Media/iTunes_Control/iTunes