simple fix
take this file and place it on your iphone :
http://www.megaupload.com/?d=AXPVO33B
in to the following dir
root/System/Library/PrivateFrameworks/IAP.framework/Support
you will see a file called : iapd rename it : iapd.3.1.2 <--- or the version firmware u have
copy the new iapd from the link above
set file to 0755
after you have placed it on the phone reboot and have fun
TESTED WITH 3G 16GB 3.0.1 FIRMWARE WORKED FINE
i JUST UPDATED TO 3.1.2 TODAY STILL WORKS

---------- EDIT ----------
here is where i found the info first :
YouTube - 3rd party iPhone 3G 3GS AV composite cable hack for 3.0 firmware or lower FIX
---------- EDIT ----------
i have also tested this on 3.1 3GS 16GB and 8GB 3G 3.0.1 works flawless aswell
again you will need the correct cables hope u got them
i ordered like 5 pairs of them and gave them to my friends lol
---------- EDIT ----------
these are the cables i bought :
AV RCA USB Video Cable for iPhone 3G iPod Touch Nano TV - eBay (item 190346422650 end time Nov-03-09 10:16:47 PST)
they have a little red led inside easy to remove it blinks over and over and drains power if you dont removed it

once removed the changering works better
---------- EDIT ----------
i bought those cables in the states for $3 each x 5 = $15 and that was free shipping not bad 2 days to get here
from hong kong u can get them for like .75 each buy 2 - 4 weeks on the shipping
---------- EDIT ----------
i just ran in to this site :
.: Suondmao's World - iPhone iapd Reverse Engineering :.