A common problem that people are having with iOS 5 is that iTunes will not sync because it shows the iPad, iPhone or iPod touch as being “Over Capacity”. This causes the Sync and Apply button to be grayed out, making it impossible to sync new content to iTunes on your Mac or PC.
The cause of the problem is most likely due to a corrupt file in the iOS software. The device is not actually over capacity, but since iTunes indicates that it is, you cannot sync or apply changes in iTunes.
Unfortunately, restoring your iOS device in iTunes may be your only remedy. Restoring is time-consuming because it requires you to download the new iOS software, then sync all of your content back to the device after the new software is installed. Of course, you will want to restore the device from a backup if you have to restore it.
Here are some things you can try to resolve the problem before performing a restore in iTunes.
Restoring will update your iPad or iPhone to the latest iOS firmware. This can be a huge problem for anyone with a jailbroken iPad 2 or iPhone 4S because the jailbreak will be lost and there is not currently a way to jailbreak iOS 5.1