I wanted to rsync between my ext3 filesystem and my USB stick (vfat/FAT32). As long as the USB drive stays mounted: no problem. Only the differences are being transferred.
After unmounting and remounting the USB thumbdrive, rsync was convinced that *all* files had changed and transferred *everything* again. This obsoletes the whole point of using rsync.
[SOLUTION]
I'm suspecting Ubuntu's default mount options for USB drives to be part of the problem.
One thing I've definitely pinned down is the "shortname=lower" option which causes all-uppercase filenames to be rewritten to all-lowercase when transferred to the USB stick.
(e.g. "META-INF" becomes "meta-inf")
This causes the case-sensitive rsync to assume files had been deleted. hmpf.
I'm still on this case.