Now that iPhone 2.0 has come out, my opinion has changed. The AppStore changes everything. Sure, there are still things I don't like (I will always prefer a real keypad over some touch-screen keyboard). To me, the idea of expandability and killer apps is what's going to make the iPhone a real player in the phone/PDA market. Third party software has been floating around in the past year, but with the release of the SDK and Apple sanctioned third-party software, the sky really is the limit. Open source is the way to go, and I'm very impressed.
One such application is Stanza. It's an eBook reader for the iPhone/iPod Touch and it's really nice. Plus it has a huge catalogue of free books (many are already in public domain, such as Tales of Two Cities). Now, it's not possible, as far as I know, to add my own eBook content. If that functionality is available, I think the iPhone will be a very nice device as an eBook reader.
I also like the location services on the iPhone. Even without GPS, it gets the approximate location by triangulation and it's not too shabby. What's nice is that with Google Maps and other third-party apps, you can check weather, look for restaurants and shops around you, and find information about the city you're at. Now that's super useful.
Basically, I'm a true believer of the iPhone now. If anyone tells me, "It's just a phone" I would eagerly object. It's not just a phone, not even a smartPhone. I've had my share of cell phones, PDAs and smartPhones, but none is going to offer what the iPhone will take us, especially at this price point (now I'm going to sound like an Apple salesman). Anyway, it really is like having a computer (without all the complexity) in your palm.
Very slick. Steve Jobs and everyone at Apple: Good job.