We have silently observed over a critical bug in the iOS 4.3 betas, and now that a third beta has launched, with the bug present, we think it’s a good time to share it. When you go to update your applications through the App Store update tool, you are prompted to put in your password to confirm. In iOS 4.3, when you click the cancel button on the password input popup, your homescreen layout will often revert to Apple’s default layout, and you will lose all of your folders.  Sux.

This is a critical bug and we’ve heard from some other readers who have experienced it. So here’s a warning for everybody reading this, and hopefully iOS 4.3 does not drop for the public tomorrow with the bug present.