Tonight I had some free time and tried to troubleshoot this problem.
I also tried a usb thumb drive...it works just fine. I may just go this route and forgo using speech recognition (which i'm not sure i'd use all that much and i'll forgo album art, which i don't care about at all. I do care about the organization aspect, but I might just say f-it.
I don't have any sd cards so i didn't try one, but I'm guessing one would work. I have an external av source (DVD player), but I didn't have a chance to try it.
The hard reset of the iphone while it is plugged in didn't work. A hard