I had my first hands on experience with the iPhone yesterday, setting one up for someone at work, and I have to admit that for what time I have spent with it, I am not impressed.
First of all, the requirement of having iTunes installed on a computer, and then connecting the iPhone to the computer to be able to use the phone functionality is ridiculous. iTunes installation is blocked at work and I doubt that it is that unusual in the workplace.
Second, the keys on the iPhone were not always responsive to my touch. And when it was, once in a while it would press the incorrect key.
Third, not all of the functionality is as intuitive as it should be. Pressing the phone button was unresponsive or cause all icons on the screen to shake...no phone pad to dial a number to call was in sight. Phone functionality should not be that difficult to find or use.
I have no desire for any kind of "smartphone", but even if I did, this experience would turn me away from going with the iPhone.