I've done the same you did:
1 Completely remove all content from the iPod with MM by selecting Music, Videos and finally Podcasts and selecting all entries and deleting them.
2 Sync my 'iPhone' playlist containing mp3's and flac's which get autoconverted to mp3's with the preset Extreme: VBR ~256kbps - Near CD Quality+ -> artwork ok
3 Sync the unseen video podcasts 'FastLaneDaily' (1 episode) and 'Mein iPhone und ich' (4 episodes) with iTunes (the options checked on the main device page are the second 'sync only marked titles and videos' and the 5th 'manage music and videos manually') -> still ok
4 Sync the playlist again after adding one album -> still ok
5 Watch one podcast episode and sync with iTunes again which deletes the seen episode -> still ok
So as always demonstration effect
My versions are: Windows 7 64bit, iPhone 4 with IOS 4.3.5, iTunes 10.4.1.10, MM 4 build 1432
Note that MM hangs when closing, sometimes for about five seconds, sometimes forever till you kill it with the task manager, about 50/50.