I actually think the iphone plan is not that bad. I went with the cheapest one. You get unlimited data, which to me is the most important part; its crazy expensive on other plans/phones. If I don't use my minutes, they roll over, so now I've got like one million minutes. They do expire eventually, but I basically can talk all I want and never worry about going over; on the cheapest plan. I can send like 5000 text messages a month, which is way more than I need. The key is to setup automatic bill pay on the website, so you don't pay late, and don't keep track of how much money it costs.
The phone is so god damed convenient. I can listen to music, order pizza for pickup, send a quick email and text message, and take a picture and upload it to the web, all on my way home from work.
No one really needs the iphone; you can do it all by other means. Its just so fun to be able to do it all in one streamlined device. I bought mine when it was $200 more, (8BG model) and I still don't regret buying it. Its got me out of a few jams too.
Perhaps the best feature is its camera; if I want to post something for sale, normally I'd have to hunt down my camera, but not anymore, I just whip out my phone.