In my experience with other phones, it's pretty much on a par with the dedicated units. Sometimes the initial lock-on takes longer (like in all Nokias with GPS) but once on they seem to be fine. I've used about 4 so far, and two others with Bluetooth GPS add-ons.
The only issue is that the software isn't as good/fast as the full blown dedicated units, but it is improving all the time. I have high hopes for the TomTom software for the iPhone... if it ever sees the light of day!