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I had a slightly different issue: my data was still there, but after the update OF on the phone said it couldn't be synced to my iDisk as the database had reverted since the last sync. I knew the server version was up to date (had synced before updating), so I opted to use that instead of the local copy. On next sync with the desktop version, I got the same error message and opted to use the local copy (again, I had synced the desktop version with the server before updating the phone so I knew the desktop was up to date). On next sync with the phone, I was told that the database couldn't sync as it was incompatible. Opted to use copy on server, all is now (apparently) good.

I was reasonably confident through all this as I had synced everything and backed up the desktop database before running the update. It wasn't at all clear what the best practice was in each of the 3 scenarios above, however (i.e. whether to use server or local copy). Maybe a sticky on here or FAQ detailing that would be useful?