Oops! Apple made a little boo-boo, and now users with older generation iPhones are having a whole mess of trouble getting MS exchange to work. Apparently this Wednesday's iPhone OS update (3.1) won't sync with some Exchange servers. Gizmodo notes that this issue is particularly prevalent on servers that ask for full device encryption.
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Apple has made an official statement about the issue. Apparently, what's actually happened is that Apple has fixed things so that their phones will not sync with servers that they do not meet the device encryption needs for. Unfortunately, the iPhone 2G and 3G don't support hardware encryption at all, so users of those models are up a creek without a paddle.
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If you want to remedy this issue, the only way to do so is by getting an iPhone 3GS. Funny how that works out, isn't it? I'm sure there's no way that was Apple's intended result.