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no, "manually manage" is not checked. I have not updated iTunes to v.10.5.
I am using iTunes 10.4.1, and have been without a problem for many man months.
Additionally there are no error messages. Itunes progresses through backup, contacts, calendar syncing, determines which apps to sync and then finishes without syncing apps or books.
And again, iTunes 10.4.1 syncs my jailbroken iPhone 3 running 4.2.1.
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