The iPod part of the iPhone is indeed, as they claimed, "the best iPod ever". That's the main reason why I wanted an iPhone, because I hate carrying 2 devices in my uncavernous pockets when I'm walking about town. The main downside to it though is that it's kind of a shitty podcast player, because the lack of a clickwheel makes it difficult to seek to or "rewind" portions long mp3s, such as podcasts. The teeny tiny popup playhead scrubber aint so hot in that respect.
The camera aint so hot, but I like that I can instantly upload photos to Flickr (if you jailbreaked your phone of course)