I could see myself using a Google phone if:
1.) My 587 gazillion iPhone apps worked with it
2.) It ends up being sexy (the leaked pic is the HTC hardware it is based off of, not the final result)
3.) It was VOIP only, resulting in a bill less than $50 a month. However, I doubt VOIP would work well on EDGE in the country, where I need my cell phone for emergencies, which would require Verizon's service, which is a bit faster in the country
4.) If the UI was full multitouch and not crippled...and as intuitive as the iPhone
5.) If it gets a huge improvement in battery life compared to the iPhone
6.) If the web browser rocks as much as Mobile Safari
7.) If it brings enough innovation to the table to outweigh the remaining benefits of the iPhone
I doubt that it will be able to achieve enough of those things to bring me over, but I'm hopeful to see some of them to further push Apple along the path of innovation. If anyone does it, it will be Google. Even though their board members separated, with the good relationship they had going for years, one has to wonder if they are secretly plotting with each other to push everyone else out of the market. They are stronger together than apart. It doesn't make sense that they would just suddenly stop being friends because the government became suspicious.
Back to the iPhone...I fully expect iPhone OS 4.0 to really stack on the new features. I bet there will be many more crossovers from the desktop OS X, such as spaces or stacks. I'm also hopeful that there will be easier access to settings changes, like for jailbreak.
Seeing how push notifications haven't been as hugely successful as they might have hoped, and perhaps not as useful as imagined (although still handy in certain situations), I give the addition of background processes for 3rd party apps a green light, but the implementation would be similar to the "tabs" of mobile Safari, where you are limited to a certain number, probably three to five. I also wouldn't be surprised if there will be a similar interface for switching between active apps. Perhaps a three finger swipe down gesture (or similar) to bring down an application switcher. It would zoom out the current app, and to the sides would show other apps like Mobile Safari shows web pages. Swipe and tap to select and switch. It is certain that Apple has to be working on this problem, since it is seen as one of the major drawbacks of the device, and they are most likely rewriting their code to be optimized and save as much battery as possible. In addition, they are probably also looking into advanced battery tech and other power sipping hardware to help this process along.
I'm also hopeful for resolution independence, as the 480x320px screen on the iPhone is getting a bit long in the tooth compared to newer devices. Even though it blew me away in 2007, the text could still be a bit crisper, especially when using Mobile Safari on non-iPhone formatted pages. Any newer, higher resolution device would have to be compatible with the 100,000+ apps in the App Store. From what I remember, Apple is rumored to be bringing this resolution independence tech to Snow Leopard's successor, most likely utilizing some sort of vector graphics system. This would allow easy scaling between devices, and would be necessary for the success of newer devices, because lets face it, the iPhone won't have a 480x320px screen forever.
So to wrap up, the Google phone will probably be pretty awesome, and shut down the likes of what is left of the Palm Pre and even the 3rd party Android customers like the DROID, but with the momentum of both the Apple and Google in this space, I see room for both to rise and conquer. Eventually they will be forced to compete in a more direct fashion, but I'm not going to count Apple out on this one. Any company that can release a game changer like the iPhone has to have some really crazy, out there, futuristic magical stuff going on in their labs, on both the software and hardware sides, and both companies have billions of dollars that they can throw at R&D. If anything, this is going to be a really fun saga to watch over the coming years, and in the long run we all will benefit from two really great companies making really great products.
There really is no downside to this, aside from the wireless companies that we'll still have to deal with.