In my opinion I found the Iphone 3G to have everything I wanted in a phone.
The range of features are excellent as with any Apple product, but that's not to say it falls down on the basics. I found the battery life to be very good and the charge time short which meant that it functioned well as a phone despite all of the extra features. The reception was clear and I've never had any problems making calls when I need to.
The handset was very durable, I dropped it down the stairs and on the floor multiple times and it still functioned perfectly. The touchscreen is surprisingly hard wearing I found and very responsive.
Obviously it is a nice and polished design. The screen is a good size meaning it's easy to navigate menus and use the qwerty keyboard. The price may put some people off, but I have had this model for over 3 years and it still functions perfectly.
The only downside I found with this model is that if you are using it as an ipod regularly, the space is not huge, so if you have lots of music you may need another mp3 player to store it all on. Furthermore, I have had a bit of trouble with the sleep/wake button. I have heard from friends that this is common to all Iphone models. This has a slight effect on the battery life as it takes longer to go to standby, but other than this, it doesn't affect the basic functionality.