Okay (OP here),
So, I had to fly to San Francisco this morning, but when I got off the plane I went right to the post office and called "Darren", who had called the phone 5 times in the last week (but not since I got it). He gave me Larry's (the owner) home number, and when I called his wife answered. She was ecstatic and gave me their address. Turns out they live right down the road from me, and she thought her husband must have left it on the roof of the car and it fell off on the curve by my house. He was going to go buy a replacement tomorrow.
I put it in a priority mail envelope - they should have it by Wednesday.
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A final note - I find the responses very interesting - especially considering the times they were posted and the locations they seem to be from. The initial responses were mostly negative - mostly saying at first that it couldn't be done, and then once I did do it, that I had either broken the law or done something evil. Later (during US daylight hours), the comments became much more "civil" and didn't seem to be accusing me of trying to do something wrong.
Do I think the police (especially in my area) are smart enough to figure out how to get the phone back to its owner? Not a chance. Do I take personal responsibility for seeing the phone returned safely to its owner? Completely. Did I try to think of other ways to get the phone back to him quickly? Yes I did - and none seemed to me likely to result in the phone being returned before he just went out and bought another one. Could I have caused this guy damage by having his data in my hands? Of course, but he's my neighbor and a fellow human being who has not harmed me at all.
What I did may technically be illegal in the UK as some of you claim (and maybe even in the US), but the result is he got (or soon will get) his phone back, and because I am not trying to screw over my fellow man, not a bit of his data is compromised. My conscience is absolutely clear, and who knows, maybe he'll pay it forward one day to one of you.