After a lot of scouring of various forums, I came across a suggestion to delete the Genius playlist from the Apple TV. This made sense to me, as we do have a Genius playlist on the Apple TV (although we have been using it for some time with no problems syncing).
To delete the playlist, go to Music > My Music > Playlists
Arrow down to Genius and hit the right arrow. A small blue trash can icon should appear. Click the center button on the remote to delete the playlist.
Now iTunes should sync again.
Apple TV version: 2.3
iTunes version 8.0.2 (windows)





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