The code looks like this:

$result = sybase_query($query) or die( "query failed:  '$query'");

It's a normal, working, select statement.

It's worth noting that I use sybase_pconnect() for all connections.

It is my guess that PHP was having a hard time logging in to sybase.
Maybe a configuration problem?
Do you still see this?

I just tried it with the latest RC1 version and the same problem occured. This is with Sybase-CT and Sybase 11.9.2.
Anything I can do to help find the problem?

What is happening with this report? I'd like to be able to use PHP4 with Sybase.

Please try something like this
<?

error_reporting(-1);
$db = sybase_pconnect("SYB_SERVER", "user", "password") or die("Could not connect to database.");

?>

What do you get?

I got the same. However, seeing the $db in your statement got me trying this:

$ok = sybase_pconnect($dbhost,$dbuser,$dbpwd) or die ( "Unable to connect to SQL server.");
if(!$ok)  
{
        die("Error connecting to SQL Server");
}

I see no  reason why this should function any better, unless the use of the or has changed. 
However, this works for SELECT and INSERT queries, but fails if I do a "BEGIN TRANSACTION" to start a more advanced operation.

So well, closer but no cigar yet.  

Hmm, I have never tried using transactions from PHP.
Try 4.0 when I comes out, let me know how things go
(ie, open a new bug report if needed.)