After a week of annoyances, sluggish performance and bugs i found, got informed of, a solution for the issue. To re-install iPhone OS 3.1.3 instead of 4.0.
Downgrading IS in fact possible and it is happily syncing my music as of this writing.

Using this handy post i was able to put 3.1.3 on my iPhone once more. And supposedly work on a more stable, fast and better OS than Apple promised 4.0 would be.

What will i miss in 3.1.3 that IOS4 has? I can’t think of a single feature. Since i have an iPhone 3G all the good stuff didn’t work anyway so blah!