Before the iPhone even came out, they had iPhone commercials with ppl doing this on the iPhone. It was one of those cool hip features.
I don't know exactly when that started, but this has been there prior to 2.1. It also works the same if you have the headphones attached. I live in NYC and everytime I drive over the Brooklyn Bridge, my call gets dropped. So I have a good amount of experience with dropped calls (thanks AT&T).
For #2, I didn't notice any difference in magnification. I viewed the same video before and after the update, same exact magnification. For #3, I have never been able to play a video in portrait mode. Are you sure about this?
Yea I've seen that prior to 2.1. I don't know when exactly this started happening (I think since 1.4) but I know it's been happening for a while.
See also post by Magic-wand where that person has screencaps too.
I musta been dreaming about the magnification...
Anyways...
re: Playing Video in Portrait mode
Yes. It works. I use it all the time. Not sure when they added this - it maybe 2.0 when I first noticed it accidentally.
There is a trick however...
The video must be in a playlist. I not sure if its got to be in a mixed audio/video playlist or if it can be just a video only playlist.
You must play the video from the playlist.
Here's a screencap (via Home+PowerButton) while Kardninal/Akon sign Dangerous.
I played the video while the iPhone was in Portrait orientation and the video played in Portrait mode. Took the screencap. Let the video play to 9 seconds, hit pause, then rotated the iPhone into Landscape orientation, and took the second screen cap.
Included a screencap of my '__A Good List' playlist showing the Kardinal/Akon video along with some other videos and the Pete Tong Essential Selection audio only item at the bottom.
Most of these are converted off of YouTube, but it works just as well with ligit videos from Apple iTunes - Shake It Metro Station is one I bought from iTunes is on this list as well just further up the list and not on the screencap, etc...
Portrait Video Playback at 4 secs Landscape Video Playback at 9 sec