I see you use windows, I am not windows user. However searching the web for your problem I found sollution (at least for that guy that had the same problem you have):
1. Plug in the cruddy iphone, and it will show up and try to sync, cancel that nonesense cause it wont do anything anyway.
2. Once its canceled click ure Iphone, Click MUSIC and then DE-Click the music box, a very funky message will pop up saying that it will remove ALL your Music files only from your Iphone <<< YOU WANT THIS
3. Once it deletes all your playlists from your IPHONE and music, manually remove ure 'Albums' from your Music library, I know it ***** if you have alot
4. Manually remove all your playlists on the left side
5. ONCE You have 0 music in ure IPOD on ure Iphone ure good to go
6. The problem occurs when you add a FOLDER to your music library << therefore you must add A File only
7. CLICK add new file to music Library > it will ask you to browse, once it does that open wherever your music files are and select all of them by highlighting it and click open
8. Once all of them are added to ure music library go back to ure Iphone and Music and then click SYNC, it will tell you it will add the music etc etc.
9. It should start syncing, if you noticed before it just said SYNCING at the top, now it will actually say... Syncing file 1-95 or 1-199 depends how many you have.