I honestly am not sure what the deal is with the USB Charger. Here is what I tried this weekend:
1. Went for an hour long ride Saturday with my wife's original iPhone plugged into it. Not a single issue. Charged fine.
2. Went for another hour long ride today with my phone plugged into it. 10 minutes into the ride I got the incompatibility message and it stopped charging. Tried unplugging and replugging into the USB charger several times, made sure the dock plug was tight, and then tried a different USB cable. No change.
3. Since I promised I would do this, I cut off the BMW harness and wired directly to the battery. I then went for a ride and within a few minutes I got the incompatibility message. Since I was with a buddy today, we turned around and went home and wired up the USB harness to his bike and plugged his iPhone 3GS into the charger. Guess what, after about 15 minutes he got the incompatibility message and he was done charging.
I think I'm going to give up and buy a powerlet charger cable. It is really too bad as I really liked the thought of the USB charger.