You can stop the iphone from automatically syncing by Checking off that option.Its right there on the main screen when u connect the iphone.
Additionally u can also set syncing preferences separately for contacts,calendar,bookmarks,email setup,music and photos.That is you can select to sync only certain playlists or photo albums only.
When itunes asks you to update select No and never ask again on that window..
The restore option is only when something is corrupted on your iphone or some programs are not responding and you are forced to do restore(meaning restore the current firmware).This will wipe out all the contents..but not to worry you can later SYNC again from itunes.
Enjoy
