I would gladly trade my 16gb touch for a 16gb iphone 3g, hell it costs $100 more. Small amount of size aside it would replace my need for touch and cell phone, which I now carry both all the time because the ipod is the music in my car.
I already have a monthly cell bill to pay so it won't be a huge issue that iphone has a monthly fee attached to it as opposed to the touch, I'm already paying for that service anyway(I might have to pay $10 or so more for data).
In my daily travels other than home and work I rarely find myself in a wifi zone so internet anywhere is a huge plus and adds way more function to the device. Then there's the camera which is good as my current phone and internal speaker(much better for showing people short videos).
I will probably end up selling my touch and sony walkman phone which will probably cover the cost of upgrading to an iphone. I know it will probably cost more than the advertised $299 or whatever they charge in Canada though since I won't be getting a new contract, I'll be upgrading my current one to include the iphone data plan (rogers better have a cheap unlimited one like at&t).