Update: Yes, the 4.1 update seems to resolve most of the performance issues for 3G owners.
According to The Wall Street Journal, Apple is "looking into" reports of iOS 4's poor performance on the iPhone 3G. Many iPhone 3G users have noted generally slow performance and glitches after installing iOS 4 that have rendered their devices nearly unusable. An Apple spokesperson told the Journal that Apple is aware of the reports and investigating solutions. That Apple is responding to the issue at all is certainly encouraging, but their response has been anything but timely -- it's come only after a month of irate posts on Apple's support forums, parody videos on YouTube, and widespread reporting on the issue (including here at TUAW).
Some blogs, including us, have noted that iOS 4.1 beta provides better performance on the iPhone 3G. I initially experienced better performance under the beta, but only for a couple days after doing a DFU restore to the beta. Around 48 hours after installing the beta, all the old bugs crept back in: slow keyboard performance, glacial application launch times, app crashes, and random system-wide freezes when using Safari. None of the suggested fixes (some of which border on voodoo) have managed to get iOS 4 working properly on my iPhone 3G. I've tried everything short of wiping the phone clean and setting it up as a new phone, mostly because I don't want to lose my application data, which includes 20+ hours of game progress in Final Fantasy and over a year of food and exercise data in Lose It. (Ed: Ouch!) (Update: a couple people have pointed out that Lose It! can restore data to an iPhone independently of iTunes, an awesome feature I had completely forgotten about. Sadly, that's a feature not present in any of the 45 games I have on my iPhone.)
For now, our advice for those lucky few who haven't yet upgraded an iPhone 3G to iOS 4 remains the same: don't do it. For the rest of you iPhone 3G owners, if you're an unlucky member of the "iOS 4 turned my iPhone 3G into an iPhone POS" group, things are looking up for you at last thanks to Apple's official response.