Yeah - I wondered about shuffle too. It's hard for me to be sure (because it's hard to remember all of the songs in 4000 track playlist) but I think it would only randomly pick from the first 99 tracks. This seemed to be what it was doing.
Others here who have the adapter may be able to help. I only had it for a week - I just couldn't stand the limit any longer.
That sure sounds strange about the 3G. I would definitely try upgrading the firmware.