Testing has shown that the iPhone 3G's performance is much improved under iOS 4.2. Rene Ritchie at TiPb has posted a video (which you can watch after the break) of both iOS 3.0 and 4.2 (the gold master) running on an iPhone 3G. Here's what he found.
Entering text into Apple's Notes app was acceptably snappy. Browsing the Web was also noticeably improved, especially scrolling and load times (over Wi-Fi). Some pinch-and-zoom was a bit laggy, but definitely worlds better than iOS 4.0 on a 3G.
Apple was recently hit with a class action lawsuit from California iPhone 3G user Bianca Wofford, who claims that Apple "...knowingly and intentionally released what it called a system software 'upgrade' that, in fact, made hundreds of thousands of the Third Generation iPhones (sic) that were exclusively tethered to AT&T data plans 'useless' for their intended purpose."
To Bianca and everyone else in her frustrating situation, we say sit tight. 4.2 is due this month.