[jfmsam]

I think the new iPhone 3G is great, but mostly for those new to the iPhone.
If you have a 1st gen iPhone, OS 2.0 is probably good enough for you. Most of the great features in the upcoming release come from the software enhancements, so the 1st gen is more than enough.
If you have a 1st gen iPhone with T-Mobile USA, it is not worth switching.

Regardless here are my arguments why I will be switching, besides hipe:

3G Data ---- Great!
Faster speeds and simultaneous talk and data. A must have for me.

Improved audio ---- Great!
I hope that also means better call quality.

Its slightly smaller ---- Great!
Better to handle without compromising screen real estate.

Better Battery life ---- Great!
Speaks for itself.

Better Price ---- Great!
Wider market appeal for most, but easier on the wallet when the switch is just capricious.

GPS ---- Great!
Great feature but not an incentive to switch.
BTW: Having GPS does not mean that you are limited to using the free Google maps. It has an open API that allows TomTom or Garmin or any third party developer to port their applications and maps to the iPhone.

In store activation ---- I'm OK with it!
If you have AT&T, in store activation is not a real issue. Nevertheless I am not sure that limitation will last when online ordering is a much more cost effective means of distributing the product. I guess they may be protecting their agreements with the new international carriers.
BTW: If you have T-Mobile USA, why would you want a 3G iPhone that won't be compatible with your upcoming 3G network??
Note: The contract extension is from the day you sign, not an additional two years to the end date of your current contract. If you have a problem with commitment, then I prefer not to make a comment ;-)

Camera ---- N/A
Front Camera may be missing but not missed for me. 99% of my calls are probably to non video ready devices and of those that are video enabled I wonder how often I'd like to use it. For the moment video chat is more a toy than a tool.
Though the rear camera needs some improvement, sending MMS pics or video from the rear camera is more a software issue than a hardware issue, so it is not related to the release of the 3G iPhone. The camera is capable of multiple frame capture (video).

Carrier Locked ----- N/A
For the moment I don't mind it being locked because I'm keeping my 1st gen for travel.
Eventually the device will be jailbroken and unlocked, but it will only make sense for those traveling and using local SIMs and for users in foreign countries that are not willing to switch carriers to one that sponsors the iPhone. Unlocking for T-Mobile's USA network is pointless; you are better off with 1st gen iPhone with OS 2.0.

Design/Form Factor ----- N/A
Its too early to radically change the form factor on a successful device.
Though there are rumors of smaller devices or clam shell forms, I'd think twice about what those form factors can offer. For me a smaller screen means pulling out reading glasses (wait until you get to your 40's)...

Data plans rate hike....?
Hmmm. The only reference I see on AT&T's site is for the data plan for all PDAs, not just the iPhone, at around $30. But in fairness, that rate for HSDPA is very competitive with the other carrier's EVDO rates. We'll have to wait and see until Jully 11th if AT&T keeps its $20 unlimited iPhone data plan...

My recommendations are:

If you really need 3G network performance on your iPhone, you should consider the switch, otherwise the phone is more targeted to lure new customers.

If you have the $$$ to buy a new device, and don't care to extend your AT&T contract, the iPhone 3G is a great device to replace your current iPhone, WM6, BlackBerry, Palm or Symbian device.

If you are new to the iPhone or planning to switch carriers at all cost or if you are lucky to have finished your current obligation, then iPhone 3G is a must have device.

If you are not planning to switch carriers, and you are holding your breath for an unlocked version to float around eBAY or such, you may end up holding your breath for while after the July 11th release and possibly paying a lot more than if you switched carriers and paid the penalties for your early termination. You do the math....

If you are mostly looking for the software features that come with the latest OS release, then you are better off sticking to the 1st generation iPhone and upgrading the OS when it is released.