I did not cave to the extent of getting an iPhone (I still refuse to deal with AT&T) but I did get an iPod Touch. I have to say, I really like it. The thing that clinched it was the Kindle app: the text is nice and clear, and while you don't get a lot of it on the page, it's not bad for when I want something to read and a book or my Kindle is not available.
I'm still getting used to the apps, and I was a little nervous that after spending all that money it wouldn't be a major improvement over my iPod nano, but the addition of wifi really makes it worthwhile. I'm hoping also that it will reduce the amount of time I spend on the computer: one of my major time-sinks is opening up my laptop or turning on my desktop "just to check one thing"... and then I'll have been surfing the web for a half hour. So... we'll see how this works!