I too saw this problem with Meerkat and iTunes 8.1, but I discovered a fix for it. I'm not sure how it translates to the dns-sd tool, but this is the Cocoa code that I use:

NSDictionary *txt = [NSDictionary dictionaryWithObjectsAndKeys:
    [@"1" dataUsingEncoding:NSUTF8StringEncoding], @"txtvers",
    [@"131073" dataUsingEncoding:NSUTF8StringEncoding], @"iTSh Version",
    [@"196610" dataUsingEncoding:NSUTF8StringEncoding], @"Version",
    nil];

NSData *txtData = [NSNetService dataFromTXTRecordDictionary:txt];

[bonjourServer setTXTRecordData:txtData];


It adds some protocol-specific options that have always been there, but that iTunes just started requiring. The above equate to an advertised iTunes version 6.0.4, which is the oldest one I could see in use on most networks.