I have to disagree. My HTC 8525 died about 3 weeks before the iPhone launch so I researched available or upcoming phones... the reason I picked the iPhone wasn't for looks. I was carrying a cell phone and a Zune at the time and the iPhone was a good choice for a couple of reasons. It allowed me to consolidate a cell phone and an MP3 player into one device. It's also a fairly solid web browsing device as well. Those were the real selling points for me.
However, I don't believe that many people think to themselves, "I want the fugliest device that is on the market" when they go to purchase a phone. I personally wish that the iPhone wasn't as wide and long as it is, but it's a balancing act because I definitely appreciate the real estate for web browsing and movie viewing, etc.
No phone is going to be perfect, but I and I'm sure that there are others like me aren't stuck on looks since we happen to be Apple consumers.