I'm using iPhone4 and the latest iOS. I've created albums and categorized my photos into the albums.
Question is, how can I then sync the photos WITH the albums into iPhoto?
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That is a good question! The answer, as far as I can tell, is: You can't!
The whole system of syncing the Photos app and iPhoto among your devices, and between each other, seems to be a work in progress. I could go on about all the issues, but the short answer is, you can't do it right now.