As for me, iPhone 4 camera is a clear improvement over the 3Gs. Yes, there is more noise visible. But there is also a hell lot of details preserved! My personal opinion is that Apple did a very good thing leaving the luminance noise (grain) intact and only suppress the color noise. Because color noise and smeared details due to heavy noise reduction are the two things that really kills the joy from the photography.
I have no doubt that the iPhone 4 photos would look visibly better (more detailed) if printed and compared with 3Gs photos. I was never a big fan of the mobile phone photography. But I love some of the iPhone photo editors and the results I can extract with them even from the lousy iPhone 3G camera. The photos I saw so far from the iPhone 4 made me really excited. Of course, iPhone 4 cannot beat my trustworthy GRDIII. But I can imagine a lot of fun with iPhone 4 camera and some very good results with proper processing.
Here are some photos I took with 3G and edited straight in the phone. They are maybe not everyone's taste. But if I managed these with lousy 2MP 3G, what could I do with 5MP iPhone 4?