Does iOS 4 break iPhone compatibility with music docks?

The answer from Apple Support is "Yes", newer versions of the iOS software probably do disable support for "older" iPhone-compatible devices (although likely "unintentionally").

The Apple Support representative advised downgrading the iOS version on my phone even though doing so would violate the terms of my AppleCare agreement (and obviously, she couldn't explain how to do it other than giving me some Google search terms).

Moreover, she stated that with the release of iOS 5 coming up that I should hesitate to purchase any Apple iPhone or iPod accessories because they cannot ensure compatibility.

Unbelievable.