Apple has released an update for the iPhone. However, this new version (3.1) will break connectivity between the phone and your Exchange server if you have an older model. Please do not update your iPhone until we issue the all-clear.
Older model iPhones are anything that is not 3GS – the very latest.
The problem with this update is that it will cause the iPhone to stop ignoring an important security feature of Exchange. By default Exchange requires that transmission between it and the phone be encrypted. Older model iPhones would simply ignore this and send data to Exchange unencrypted anyway. Most Exchange servers are configured to accept unencrypted transmission for compatibility purposes with legacy mail systems so the mail goes through anyway.
However with this update, the iPhone is no longer capable of ignoring the request from Exchange for encryption but the older models are also incapable of encrypting the email, so email breaks.
We’ll let you know when Apple has released an update for the iPhones that can’t encrypt email.