My 8 gig original iPhone is limping along with a couple of odd bugs that the Geniuses at Apple can't figure out. It's out of warranty, and I've basically just been trying to stretch it out a little longer until the new one hit the market, but like Rasputina, this upgrade isn't all that tempting to me. Even with the switch from Edge to 3G. If mine wasn't acting up, I wouldn't even consider it, I'd hold out for the next one.
And I've had AT&T/Cingular/AT&T for 9 years running, no issues with either the phones or the service I've gotten. The old iPhones weren't the greatest cell phones ever made, but once we added bluetooth headsets, we stopped having quality issues with the calls. And we're not on 3G, which I've heard locally improved things.
I wonder if other parts of the network aren't as good?