As soon as I put the iphone in the cradle, the itunes server popped up and told me to upgrade my itunes to 7.7. I upgraded and tried again. This time it recognized the iphone 3G and presented me with a new set of tabs. I could now see a new Ringtone tab and an Application Tab. It also gave more options about syncing contacts. Under Help menu, I notice a new Iphone Help option.
I tried to create a ring tone and it told me I had to use a song i purchased from itunes. I went to my itunes Purchased folder and tried one. It told me that the song wasn't eligible. I tried another and it told me that I had purchased it too long ago! Ugh! So i tried on Carol King song i had just bought and it proceeded. However, it wanted to charge me another .99 cents to make it. I have already paid for it! I hit cancel and said forget it.
I searched on the web and found out how to make them for free with GarageBand software and found several apps that let you do it for free.
I hit sync and that went smoothly.
*Interesting enough, I had my contacts on my computer at work and when I hooked it up to that computer, it warned me that I had already synced it to another computer and that I could lose data, but then it proceeded to let me sync selected things to my iphone (like just my contacts) and said there was stuff on my iphone that wasn't in itunes and did I want to transfer that to itunes! Wow! remember the days where it would overwrite it all. A two way sync! How cool.