I suppose I'll just reply to this myself, as I seemed to have figured it out.
I loaded music onto my iphone4 (previously, I had no ipod music loaded). Once I did this at my computer, I reconnected the iphone4 to the AVH-P3300BT and it worked perfectly.
Simply Plugged it in, the source moves to 'iPod' -- Then choose the 'App Mode' button that I had clicked about 50 times before and boom, it switched right over, gave me the 'warning' message and let me click through. Netflix, Youtube working perfectly.
In short, if you're having trouble, try loading up some music through itunes an