I have an iPhone 3G that I'm used to be able to sync with my iTunes 10.1 for music and podcasts. Now when I sync an mp3 onto the iPhone, iTunes will crash when trying to transfer the first song with an Invalid Instruction exception.
My computer is Windows 7 x64. I have USB 2.0 ports on it as well.
If I unselect syncing music files (just the calendar and apps) then the phone will sync without issues.
I also have an old 30 GB iPod, and that will sync all music files without issue.