Transfer Apps, Contacts, Music and Personal Data from an old iPhone 3G to a new iPhone 3GS
The new iPhone 3GS has arrived, and I've had a chance to put it through it's paces over the last couple of days. I definitely recommend it - especially if you can get the upgrade pricing - and be sure to check with an Apple store for in-stock availability, because AT&T stores are currently backed up at least a week.
The first thing I did when I upgraded was to copy everything from the old iPhone 3G to the new 3GS. This included all the apps I had purchased, and all the music, photos, contacts, email, notes - the whole enchilada.
Overall the process went fairly well, and I'll rate it a B+ in spite of a few gotchas along the way.
Here are the steps I took to backup my old 3G and restore the new 3GS from the backup. These same steps can be followed to fully backup an iPhone 3G (and you might realize after reading this article that the backups you've been doing have not been backing up your purchased apps).
1. Backup the old iPhone 3G
Connect your iPhone to your computer with the USB data cable and open iTunes. Wait for it to recognize your iPhone, and then right-click on your iPhone in the left side bar. Select "Backup" from the short-cut menu to start the backup.
The first backup took about 20 minutes on my iPhone, which was loaded with about 4 GB of data. I say first, because I ended up having to do it again because the first run didn't backup my purchased apps nor my music files.
Instead, I received an error message indicating that not everything was transferred, and that my computer wasn't authorized to play the items (even though I had already authorized my computer).

Turns out you have to tell iTunes to transfer purchased apps from your iPhone to your computer, and Apple didn't put the menu option in a prominent location.
2. Transfer Purchased Apps
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