Wait for iTunes 11.1 to be released when iOS 7 is released to the public. Or if you're a developer (it appears you are not), download the iTunes 11.1 beta from the developer portal on Apple's site.
You'll need the iTunes 11.1 beta which you can find all over the internet (not gonna say where exactly) or through the Developer Center. Otherwise, like Intell said, you'll have to wait for the official version to be released, because older versions of iTunes don't support syncing with iOS 7 devices.
So just to be sure will the sync problem and backup problems be solved when the final release of tunes 11.1comes out? Just thinking that this isnt a ios 7 problem, but an issue itunes is having with communication with either the phone or my mac... Any thoughts?
iTunes 11.1 will fix that error message. It's iOS that is telling iTunes that it only works with 11.1 or higher, then iTunes checks its version, sees that it is lesser, then prompts the user to upgrade iTunes to the required version.
I forgot to mention I have 11.1 beta 2 running, and it does allow me to update my music, and it seems to go through a sync process after the initial error message. Just hoping my phone isnt messed up, cause it seems that this ios7 build is going to be final. IF thats the case I will have to downgrade back to ios 6.14 and itunes 11.05 respectively. Hoping the itunes update fixes it, and hoping the ios7 GM version will register as an update opportunity, just to eliminate any problems with either version.