I came across a small issue earlier in the week where we had a website using custom post types but the pagination was not working correctly. Every time you went past the 2nd page, you would get a 404 page not found error. It seems that WordPress 3.0 and custom post types are not working so great however there is a small fix to get around this issue.
The trick is to wrap the code with an add_filter and function. Like so:
if (taxonomy_exists($wp_query->query_vars['taxonomy'])) {
add_filter('pre_get_posts', 'postcount_filter');
function postcount_filter($wp_query) {
$type = 'post_type';
$paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
$args=array(
'post_type' => $type,
'post_status' => 'publish',
'paged' => $paged
);
$wp_query->query($args);
}
}

Hi David,
I am facing the same issue. I am php newbie, so could you please give me more details about your above code. How do I use it?
Best,
Daniel
Hi Daniel,
Create your taxonomy template file (ie: taxonomy-artists.php) and include the above code at the beginning of the page, right under the header include.
Let me know how you go
Cheers
David