You can add Andy Ihnatko to the short list of people who have played with an actual iPhone, not a paper cutout. Andy spent a good 45 minutes clicking around the interface and let's us know that the how experience was smooth. The phone reacted quickly to his commands (something my Q doesn't do) and he even claims that the virtual keyboard let him type faster than a physical keyboard (that is something I'll have to try myself before I form an opinion of it).
The most interesting note Andy has is that the iPhone is running Leopard. Those fancy onscreen effects are courtesy of Core Animation. Sadly, Andy also confirms that a Flash plugin for the web browser isn't in the cards, at least not yet but we have months to go before the iPhone ships.