iOS 4.2 started out fine for me, but after using it for a month now, I've noticed that it lags quite a bit. If Apple doesn't release 4.3 soon, I'll go back to 4.1.
So far, in my opinion, 4.1 is the best of iOS 4 releases.
Due a google search for "iOS 4.2 slow" and you'll see a plethora of threads and articles about the subject. It doesn't seem to effect everyone, but for me (someone who has restored my iphone as a new phone 3 times now under 4.2), I find the latest iOS to be slow, slow, SLOW. My screen animations are choppy and sometimes my keyboard lags behind my typing. I really dislike the fact that iOS 4.2 has made my brand new iPhone 4 seem antiquated.
I'm hoping 4.3 will cut the fat and streamline things a bit.