Not too many ppl talk about how hackable the iphone is. To illustrate that, one way to 'expand' upon the application space is to move it to a different partition and make a symbolic link to point to the new space. Yes, many ppl forget that the iphone has a BSD core underneath.
As for the apps, there's plenty of good ones now (the included apps are good enough, the 3rd party ones available are pretty cool) but come June-July, I'm guessing there will be an explosion of apps for the iphone from big 3rd party names which will make a considerable dent in the market (and the iphone's capability... & desirability . Yes, most of them will probably be commercial (I assume with the high level of polish and quality, but curse them if they aren't) which I don't mind paying for good stuffs anyway. But this may be a sticking point for those on the budget..