Problems with the iPhone.
Optical glass as the screen and is not beveled so it lays against the glass, it will scratch in minutes, it since you look in the same area you touch, it will need to be cleaned daily.
No Buttons, try dialing that without looking down.
$500 device that is not compatible with Exchange the most popular business e-mail server, the largest market for $300+ phones.
It's not Windows Mobile, like it or not the world is dominated by Windows, that's why Palm's are running Windows Mobile.
It's $500, even Motorola's Q was about $200 with a service plan when it was released.
It's AT&T/Cingular only, it's a large network, but it's still only on a single network for the next 5 years.
Finally Jack of all trades, master of none, iPod was popular because it's the most refined MP3 player, good device user interface, good computer user interface, and it's truly plug in play after you set it up. The iPhone is a crappy phone, crappy Smart Phone, crappy Mobile E-mail device, and a crappy iPod (it has full size iPod features with Nano sized memory).