The problem is that all my music and podcast are greyed out in iTunes.
I tried the 'consolidate library' option and copy all the music to my local hard drive. That did not work but now I seem to not be able to manually manage my collections (although I can sync to them) myself.
Unlike the iPod, I can't find the 'Manually Manage music and videos' option anywhere for the iPhone.
Anyone else has this problem and solved it?