Doesn't change the fact that the iPhone sucks/is an overpriced piece of ****.
I'll add a qualifier to that, since that is what changed my position on the iPhone. At $600 with a two year commitment, yes, it was completely overpriced. However, it's now relatively easy to get them for $400 (minus $50 for a like new refurb) without having to sign a 2 year service agreement (either by hacking the activation and using an existing account, or purposely failing the credit check and getting prepaid service)
Taking that into consideration, it is a much more interesting device. I recently picked one up because of the price, with the intentions of testing it out to see what the fuss was about, then reselling it without losing any money because of the demand for them, at which point I was going to pick up another Windows Mobile 6 device.
First of all, I must say, the device is a reasonable size (large compared to a phone, small compared to a pda/phone), and has a nice weight to it, but the style of it screams quality. It appears very well built and solid, like it was carved out of a single block of wood. GUI is very simple and intuitive, and it runs silky smooth compared to WM devices, with virtually no lag in switching between programs. Of course, the media functions cannot be matched by any WM device. The screen resolution is amazing as well, doubling most WM PDAs and Smartphones. The multitouch screen really does work... it's nothing like the PDAs of yesteryear. The softkeys are a huge improvement over older PDAs, and are a great medium between dedicated hardkeys and additional screen size. The web browser renders webpages very well, much better than even Opera mobile on WM. All of the standard functions of the iPhone are integrated well, with different programs that work together to make things nice and easy.
Third party support is huge for this device. You can order virtually any kind of accessory or modification that you desire. The phone can be easily hacked, activated, and unlocked. There is a third party application installer that is unlike anything I've seen on other portable devices. It keeps a running list of native 3rd party programs that you can install (there are alot), and lets you automatically install them. It then keeps you notified of updates to them, which is can also install, and even has an uninstaller for programs you no longer want. It's no secret that the iPhone is very locked down by default, so this is a huge help in opening up its capabilities.
What about it's downsides? Well, there are a lot, but most of them relate to Apple's desire to keep things simple and control EVERYTHING about their hardware/software. Almsot all of these can be fixed up a firmware update, but Apple doesn't seem that interested in releasing them. There is rumored to be one very very soon, so we'll have to wait and see how that turns out. There is no 3rd party support out of the box, though easily hackable, it is not supported. There is no exchange server support. As always, there is a workaround (at least for email), but really, integrated exchange support would be a huge deal for many people.
Bluetooth is only available to use with a headset, and thus you cannot use bluetooth headphones, file transfer, sync, etc. It cannot read numbers from the SIM card, nor can it send MMS messages. It requires a proprietary connection for headphones, and thus really limits what you can use with it (as of now, there are zero good replacement headphones, so many people, like me, just splice a better set of buds on the standard ones). No removable battery, though this adds to the "cleanliness" of the device, it really inhibits those of us that like to carry a spare battery. It has to sync with iTunes. Not exactly something you'd be able to do in a professional environment. No 3G capability. They claim battery life issues, but really, there is no excuse. At least WiFi is included.
Overall, it's a very trendy device, and it works great. If you can live with the limitations, you'll be quite amazed by the device. It's nice to have a small collection of my music and a few TV episodes to carry around when I get bored. Sure, there are plenty of little things that make me want to swap back to my WM device from time to time (exchange through activesync being the biggest), but it's hard to give up this screen resolution, UI, and quick speeds that this phone offers. Combined with the price drop and third party support, it has certainly changed my mind about this device in particular (I still do not like Apple as a company though, and the limitations they've placed on this device have done nothing but affirm that)