As far as I know, it is physically possible for the iPhone to create its own Ad-Hoc network over WiFi. It would be nice if there was a app that would allow you to do this, or somehow otherwise turn the iPhone into a 3G router. It can be a hassle on a windows computer to create a network to connect to for PdaNet.
It would be really nice if more than one user can connect at a time, if possible. But the main goal is for another iPod Touch or such device to be able to connect to my iPhone.
When I downloaded the computer client for PDAnet it created the adhoc network on its own. Did it not do it for you? The othe iTouch should be able to join your network and surf from the connection.