When the iPhone is docked it will display a large clock, the brightness of which can be adjusted.
Additionally, it can be set to 'Sleep' after a period of time so that it can be used for streaming or listening to iPod whilst in bed (I know the timer can be used to stop iPod, but not a stream/close safari).
Large Snooze and Cancel buttons for the alarm would also be nice.
I'm not sure that the screens were designed to be on for so long every single day...it seems like a waste. It might put a lot of unneeded mileage on the hardware. But an mp3-alarm clock is certainly possible.