My ical is set up for all Birthdays which are set up for "yearly" to give an alert 2 days before the date. The alert appears on my Mac and ipod(via mobile me) but not on either of my ipads. If I change the Birthday setting to 'once' then the alert appears

Tried setting birthdays on the Mac first but still no joy.

If you have been using the mac.com Apple ID to make iTunes purchases recently, then there should be no issues continuing to use it with the new iPhone. I would abandon the new ID as you will never get Apple to merge the two IDs. I have had a mac.com ID for years and continue to use it with my iPhone 4S.
Tell us the issues that you encounter trying to set up the iPhone with the mac.com account.

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