After much muttering and spluttering and a modicum of curses, I hooked up the laptop and it all worked fine on that - except that I'd "transferred" most stuff to the desktop. It helpfully offered to wipe all my stuff on the iPhone for me, which offer I declined.
I had exactly the same thing happen to me. When I downloaded music movies photos etc it dumped everything onto my desk top. itunes does that by default and you need to alter the destination of downloaded music to a file of your choice. Maybe you could set up a folder in my documents and then point to software to go there instead.
Go to edit - preferences - advanced tab then media folder location and alter it. I presume you are using Windows??