So I've been trying to find out a bit more about the iPhone's capabilities, this site has some good details. No shaders, roughly enough power for 15000 lit triangles @ 30hz. Not too shabby, I wonder about the power consumption and if certain hardware paths drain the battery faster than others. It would be nice to make something that people can play for more than 3 hours.
So the word on the street is that O2 are bringing out a pre-pay iPhone in December, I'm currently debating whether to wait for that or just get an iPod touch which you can still develop for using pretty much the same feature set.