I love it. L O V E it. I was never one of those people who carried around a phone for anything other than making calls - web browsing or even text messaging was painful on pretty much any other phone that I've ever owned - but I've ended up using the iPhone for calendars, web browsing, photos...I can even carry my work around to show clients, since it's a robust video iPod.
The thing saved my ass a few weeks ago when I got a flat on the Busa somewhere in Ontario, CA. Located where I was using Google Maps, searched for "Motorcycle", found a Yamaha dealer 5 miles away. I clicked to dial the number, found out he had a tire and would fit me in, and used maps to figure out the quickest way there. I had pretty much worked out a solution in 5 minutes.
If you're using a Mac at home, it syncs seamlessly with iTunes, iPhoto and iCal. Can't speak to how impervious it is to dropping; although I can say that the screen is really really tough to scratch. I've been carrying mine around in my pocket, on the bike etc., and the glass is still perfect.
Biggest peeve: AT&T. It depends on where you are in the country - for some it's ok (in Los Angeles they're really no better or worse than any other carrier that I've been with) for some AT&T is a bit of a nightmare, depending on your usage area.
If you're thinking of getting one, wait until the Macworld convention in mid-January to see if they introduce an updated version.