I even work out with my iPhone4. I have an app called Runmeter that uses GPS to log my workouts. Plays music, can make a call when needed. If I get up-ducted by aliens...Find my iPhone will locate my remains....etc. Pretty much does all the iPod features without hassle. I say, it completely deletes the need for the iPod.
Oh, I have a Belkin armband made for the iPhone4. When not working out, I leave it in the pocket and answer calls with the earphones.
**The only reason I kept my older iPods were to keep plugged into external speakers around the house. However, with AirPlay...that is going away too. The iPhone can now wirelessly push music content throughout the house.***