The iPhone 4 has been shrouded in controversy and drama for months. First there was the the lost iPhone that showed up on Gizmodo back in April, which was subsequently followed by a police raid on Gizmodo writer Jason Chen’s home. Flash forward to June 15th when iPhone pre-orders began and both Apple and AT&T’s servers were unable to keep up with the volume of orders rolling in. Amidst the chaos, some users had their credit cards charged twice while others soon found out that their pre-orders had been cancelled altogether.

And now, of course, Apple is dealing with a serious problem with the potential to adversely affect its bottom line. Over the past few days, iPhone 4 owners have been complaining of shoddy network performance when they hold their new device a certain way. While Steve Jobs casually told one concerned owner via email that he was holding the device wrong, there’s no getting around the fact that these reception issues are worrisome.

That said, AppleInsider readers keeping an eye on Apple’s tech support forums reported on Friday that Apple is planning to issue an iOS 4.0.1 software update aimed at alleviating the connection issues associated with the iPhone 4’s new design, wherein the antenna system is integrated into the exterior of the device. AI notes that the the entire thread regarding the seemingly widespread issue was eventually taken down.

The fix is expected to address a issue in iOS 4 related to radio frequency calibration of the baseband. Readers who saw the original forum discussions say that the issue is believed to occur when switching frequencies; because the lag is allegedly not calibrated correctly, it results in the device reporting “no service” rather than switching to the frequency with the best signal to noise ratio.

The article notes that iOS 4 changes the way the iPhone baseband decides which frequencies to use, which helps “explain why iOS 4 has also caused similar problems for iPhone 3GS users.”

The bug, which can hopefully be fixed with a crafty software update, has comically been dubbed the “death grip” by bloggers.

And giving even more hope that a software fix is on the way, iPhone 4 users on AT&T’s 3G MicroCell network have been unable to replicate the issue, presumably because it’s always the most powerful available signal, thus never forcing the device to switch frequencies.