iTunes cannot read the contents of the Iphone
I recently got this problem on my PC after doing a reinstall of Vista.
I thought I was pretty smart in copying all the settings files of itunes. But as soon as I put my iphone 2G ver2.2 my iphone media was gone and I got the itunes message that I should restore.
I suppose you can restore but you will lose everyting on your iphone.
this thread also had this problem http://www.hackint0sh.org/forum/f128/24847-2.htm but I had to delete another directory.
In putty i used this command
rm -R /private/var/mobile/Media
Then when I connected it again to itunes - itunes accepts it as a new iphone and as far as I can see so far I have not lost anything from my iphone.