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FINAL SOLUTION:
After failing with all the above tips and many hours later, i can finally sync music. Here's how:
Restore iPhone (not Restore Backup)
Make sure you do a backup first. (right click iphone under devices in itunes)
Basically it wipes everything and does a setup from new.
Contacts are automatically redownloaded. Messages are lost. Personal settings are lost.
Apps remain in iTunes and need to be installed on phone again. App login details and data are lost, but when you sign in to the app it remembers all your settings, so no big drama.
Resync music/photos etc.. and you are back to normal.
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