I am in a similar situation. I am still on Sprint since the previous version of the iPhone wasn't good enough. Now that they have 3G and more apps it's a hard choice to make.
I still want AT&T or Apple to get off of their @$$es and give me insurance which is unparalleled in the Sprint world, but I can live without it since I haven't lost too many phones, but you never know.
The features of the Instinct smash the iPhone's hands down, but I too worry about the speed of the OS, not the web however, since EVDO is faster than AT&T's 3G from what I have seen (NOT PROOF of course, just observations). The iPhone UI is amazing and unmatched, but I wish Apple had put their foot in features, but anyone could have guessed that while Apple was playing catch up with 2001 cell phone features the comp would be putting out 2008-2010 feature sets, which the instinct has.
The bill is another big issue. The unlimited everything plans that are out now are unreal. If I had an Instinct and stayed with Sprint I would get one, and laugh it up to any iPhone/AT&T user, but I know they would just show me their UI and shut me up. Right now my bill is $65 with unlimited web and 700 minutes, but to get unlimited TV, Text, etc, I'd pay $100+ tax.
The feature set of the Instinct matches and surpasses that of the iPhone in almost every way that I have seen so far. The UI is still circa 2004 smartphone IMHO. It's effective, but it's not as shiny. And that keyboard looks too ordinary indeed. No correction or XT9 with much larger buttons ala the HTC Touch.
I agree with anyone saying to try both out and see if the Instinct is worth it. The deal breaker for me is going to be how it syncs with machines and my music. I have a .Mac/Mobile Me account and enough music to want the phone to play nice with it, so those may seal the deal for me. But Sprint's unmatched insurance and service plan price; along with Instinct's feature set still makes it a hard choice for myself.
Only time will tell.