With iTunes 7.6 and iPhone Software 1.1.3, Apple is bringing back the option to manually manage music and videos. Once you enable the option; you have to manually manage all music, movies and ringtones.
This option should also be available for iPod touch, unfortunately, I don’t have one to verify this.
But I still can’t drag music to my iphone on my home machine, connect to another computer and play the music. This sucks! I could do this with an ipod, why can’t I with an iphone??!! I’m very disappointed in the Iphone because of this.
It is important to note that it even works with just iTunes 7.6, you don’t need the latest iPhone firmware. I’m using 1.1.1 and it works perfectly! Very happy to see this feature added.