I have just updated to 4.2, and the space for my music is still taken according to iTunes, and the device "About" screen says I have 723 songs, but I cannot see it in the iPod app. I assume that another sync is required to activate the content again or something to that effect?
iTunes can see the content on my phone and even allow me to play it. I will attach some images to illustrate the issue. My photo library was updated and seems to work. I have also tried closing all apps, which did not help.