I don't why some people rave about the video quality and think they can use it as a camcorder. Come on, the quality is atrocious for use as a camcorder. I read a review of the 3GS's video capabilities on a camcorder website. WTF? They moaned that it did not have a tripod bush.
I don't think enough people see it for what it is.
Don't waste your kid's childhood recording memories with the 3GS. Get a proper camcorder.
Saying that though, for a phone the quality is not bad from what I have seen.
It's going to be great for capturing spontaneous things and for that it's probably worth every penny for the upgrade but in 20 or 30 years time do you really want to see shaky 640x480 videos of your kids?