I had a customer who just upgraded to Lion and iPhone iOS 5. After the upgrade, his iPhoto albums would no longer sync. It would look like it worked, until the very end when the sync would quit.
To fix the problem, I found a website that told me that the photos database that iOS 2.0 -> 4.3.3 used is no longer compatible with iOS 5. You have to delete the database and allow iTunes 10.5 to create a new one that is iOS 5 compatible.
Go into the Finder, click on “Pictures” and look for a file called “iPhoto Library”. Right-click (or put 2 fingers on the track pad) and click it, and choose “Show Package Contents”.
Find a folder called “iPod Photo Cache” and delete it. Then, empty your Trash!
Next, close iTunes and relaunch it. The sync should now work.
