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I can answer the easy question - we're still using WebDAV to do your syncing; we're just using Bonjour to find the sync server on your local network.

The error message basically means that your Mac and your iPhone are having trouble talking to each other - maybe the settings on your wireless router changed, or the firewall on your mac got tweaked?

There are a couple of things that could be going on here; if the above doesn't ring any bells, we'll need to gather some information that isn't going to fit in a forum post. If you email the support ninjas and reference this forum thread in your email, we can help you straighten this out.