I just tried connecting my 1st gen ("2G") iPhone. Still seems to work for me. I have a separate iTunes library for the old iPhone (in a separate user account), because I don't want to lose the old versions of apps that are compatible with it (when I connect my more recent iOS devices). My practice is (or "was") to only update apps on the iPhone, and then let iTunes transfer apps back to the iTunes library. Since that iTunes library is only used with this iPhone, all the apps stored there are compatible with it. I do NOT update the apps in iTunes, because THEN they become incompatible. And those apps do not get updated just because I updated the iTunes version.
I did notice that the iTunes app on the old iPhone (with iOS 3.1.3) crashes. But the iPod app (the music player) still works, so I can sync songs to the iPhone using iTunes (on my Mac) and play them on the iPhone.
Can you describe in more detail what does not work, or what you are trying to do?