Hi. I have successfully transferred (ssh via cyberduck ) my website (www.iCommunicator.org) into private/var/mobile/sites/ on my jailbroken 1.1.3 iPhone
I have installed lighttpd from installer sources and this gives me a webserver at 127.0.0.1/
I discovered this using Wild Eyes. I used it to navigate to - /private/var/mobile/sites/ to my index
.html and launched it and noted the address in safari. By adding this to home screen I can run my website on my phone without wi-fi or edge and its fast as I am using video clips.
Just to be clear this is an iPhone webserver to my files not to the outside world
I know about the favelet bookmarking way but this does not embed movie files

Also as it goes into the private/vars/ area this is (according to BossPrefs) part of the 8G iphone disc space not the 300mb allocated to apps - so no size restrictions.

Sweet