Well, did some experimenting tonight ...
First, to determine if the problem was some weird track/artist name, I stripped off almost everything on my iPhone except a couple pretty basic playlists.
That still didn't catalog my iPhone quickly.
Next, I took my older 5th gen video iPod, and dropped everything off that. I put on a few basic albums (different from what was on my iPhone). This worked fine, took about 30 seconds.
Then, I added to my iPod the same songs that didn't work on my iPhone. Worked fine on my iPod. Didn't read everything super quickly, took about 30 seconds, but it worked.
On top of that, I turned off my car, unplugged the iPod, turned off VR Catalog, and then started it up again and plugged in my iPod.
I was still able to do VR song/artist commands. (Unlike what I experience with my iPhone).
So the problem is clearly with the iPhone (FYI I have a 3G with 1.3.3).
When my girlfriend gets back in town I'm going to try to VR Catalog her phone, as I believe she still had 1.3.2. If that truly is the culprit I might have to figure out a way to dropdown to 1.3.2 again.
Alternately, I might just get a new 160 GB iPod and dump everything onto that and run my music off of that instead.
UPDATE: My neighbor actually has a 3G with 1.3.2 on it and I tried connecting it. No dice. Still didn't read the catalog. So I guess it's the combo the HU & iPhone.