"Considering that the iPhone is also an iPod and my battered old iPod Mini was almost completely knackered, the iPhone wasn't a horrendous price at all."

That was one of the reasons I originally got mine. My iPod was knackered and I needed a new one, but I was also after an internet dongle because I knew BT would screw up my Broadband order when I moved house and I'd be without it for a while (a month, as it turned out - thanks, BT!). When I looked at the combined cost for a new iPod and a pay-as-you-go dongle (plus top-up), the comparative cost for the iPhone made it a no-brainer. Now I wouldn't be without it.