Dan,
This is a bug somewhere in the USB driver for VPC 3.0. I have been working with an individual over at Connectix to get this to work properly, and currently our brick wall is getting our hands on an expensive USB chief to analyze the problem. Currently you can use the serial port on the Mac with VPC to download music. I've taken the din8 - db9 connecter from my Palm Pilot cradle and in the preferences dialog in VPC, map the modem port to COM1 and be sure to check the preference "non-modem device". I have successfully downloaded the firmware upgrades and sync'd the unit.