After a few emails with the Pinch Media team, the problem is solved. Basically, you should NEVER USE THE DROPDOWN TO SELECT A DIFFERENT ACTIVE SDK.
Set Base SDK to 3.0 in Project Info. Set iPhone OS Deployment Target to 2.0 (or whichever version you're targetting) in Project Info. Leave the device/configuration/target dropdown set to the Base SDK (3.0), or Xcode will use the OLD toolchain associated with the selected "Active SDK".