From what I'm hearing, it doesn't sound like a OS version update will work, it's more of a hardware flaw/issue. My phone began doing this after about a month of almost daily headphone/music player use (no more ipod for me for the last 2 years).
My issue went away the day the replacement phone arrived. I sprayed a few healthy squirts of canned air into the jack and the problem went away the next morning. My 9700 still drops calls and resets intermittently, it drops from 3g to gprs when i'm on a call, even if I'm sitting in one place in downtown miami area, not driving. I'm gonna try the nexus one..
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