The OS was a step down to me from the Microsoft OS at the time - I could create a fully customizable home screen, put apps into tabbed folders, actually load and RUN 3rd party apps, change fonts, colos - everything. No, the initial iPhone OS was NOT revolutionary at the time.
The Web Browser was standard in Microsoft's OS that supported flash and there were many 3rd party Web browser apps that also worked even better. The iPhone web browsing experience was much better though but primarily due to muti-touch. So I think that's more multitouch than web browser per se.
Carrier control is not the phone - so that's not what we are talking about.
The iTunes integration was cool. However, at the time, Apple had proprietary DRM protection on everything, so you could only play music on an Apple device. Music purchased elsewhere was able to play on almost any device. Still most of us had iPods at the time and thus tied to Apple for media, so this was a definite advantage, but certainly not revolutionary.