Upgraded to 3.0 for Ipod touch and stereo can't find music

I just upgraded to 3.0 and now I can't listen to music in my car. I have a Kenwood KDC-MP642U stereo head unit with a USB interface. All worked fine before the upgrade.
The stereo just blinks "reading" for 30 seconds and then "No Music Data". I returned the stereo thinking that was the problem and here I am. We even tried a seperate Ipod which worked.
Why is this even an issue?
Please help?

I'm don't know if the stereo is compatible with Iphone/Ipod 3.0? I'm assuming that the stereo isn't compatible with 3.0 since it stopped recognizing my "music data" immediately after I upgraded. I purchased the stereo within the last 2 months. Is my stereo not compatible with my Ipod or is my Ipod not compatible with my stereo( I would like to think it's the latter)? I'm trying to find a firmware update or solution for this problem.
I exchanged the stereo for the same model. After the Installer swapped radios we tried my Ipod touch(which DIDN'T work) then his newer generation Nano(which DID work).
Thanks

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