First impressions - it looks a little naff. The design itself is simple and good enough but most of the features look like iPhone gimmicks. There appears to be significant lag in the interface according to the YouTube videos and it looks less practical from a UI perspective. The multi-touch bit on the iPhone is presumably patented, which is why the photo zooming, etc looks slow and awkward.
I reckon this thing will flop. I don't know how Apple has done it but, like the iPod before it, the iPhone just makes everything else look like second best. I can imagine buying this device is like getting a Creative MP3 player. Rather than marvel and gawp at your device, people just ended up saying "so how come you didn't get an iPod?"
Not that Apple should become complacent though. The good news is that competition will push Apple's products and make them better. We could certainly do with the higher res screen, for example.
I'll definitely be waiting for the 3G iPhone though.