Adding a contact photo to a contact on iPhone breaks ActiveSync to Exchange

This is a weird one... I have a user who has an original iPhone, we just upgraded her to 2.0 a week ago. She noticed that she lost her contact photos when we replaced her contacts with those stored on exchange. She added them back to the contacts on the phone and everything appeared fine. The problem came when she went to add an email address to a contact (which had a photo). It did not update on the iPhone.
Adding a contact on the iphone synced, and modifying a contact that did not have photo synced. Modifying a contact on the computer (one which was not syncing to phone) synced to webmail, so that part of the sync (desktop to exchange) was working. If you remove the picture, it starts syncing again. Issue persists in 2.0.1.
I will test on a iPhone 3G tomorrow and see if the problem persists on all phones and exchange accounts. Can anyone verify this on their setup? If it is not a problem for you are you using exchange 2007?
Thanks!
Setup:
Exchange 2003 SP2
Entourage 2004
First Gen 8GB iPhone
Workaround:
Either remove photos, or disable active sync for contacts, enable syncservices to sync to OS X address book, and sync via cable.

UPDATE: OK, today I tested with 3G iPhone, and there is no issue at all syncing (in fact, the contact picture appears as an attachment to the contact if viewed in webmail).
I then setup another 1st Gen iPhone to the same exchange server, add a photo to the contact, made a change to the contact, and have the same problem -- no sync after photo added, syncs when photo is removed. I even deleted (from Entourage) a contact that I had added a picture to on the phone, and that change did not go to the iphone until I deleted the photo (Waited about 5 minutes). About 20-30 seconds after deleting the photo on the contact, it recognized that the contact was deleted from the exchange side, and pushed the deletion to the phone where it when poof right before my eyes like it's supposed.
This is kind of baffling since you'd think the software is the same between the first gen and 3G after 2.0, but the problem is very re-creatable for me...]

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