This is a step-by-step process of what works for me. Its stupid and annoying but it works so:
Step 1 - Change USB mode to "Samsung Kies"
-> Settings
-> about phone
-> Samsung Kies
Step 2 - connect to a PC with Kies already installed. It doesnt matter what version, all versions work for me with this method
Step 3 - MTP will start crashing so press the middle home button (Galaxy S I9000)
Step 4 - when the Galaxy S returns to the home screen, pull down the notifications bar and look for the USB mount/unmount option. (If its not there, your problem is different then mine so I can't help you). Unmount the phone
Upon unmounting, the SD card will mount back into the phone, the media scanner is running, and once complete the MTP program should start up again but this time it will connect.
This method worked for me and friend's phone. Remember one important thing... before disconnecting the phone, pull down the notification bar and unmount the SD again. Once the media scanner starts, pull the plug before it ends. Failing to do this *may* leave your SD card unmounted giving you no access to your files. To fix this you would need to do a reboot.
Hope this helps anyone. I tried the long file name thing but it didn't help me. It took me a few hours of trial and error to figure this one out.