I'm surprised there haven't been more comments on this thread since the announcement of the iPhone 3GS.
Think of the implications arising from all of the improvements.
iPhone 3GS hardware upgrade: more than incremental?
Voice control - touch a button and do anything, perfect for a car environment where your eyes need to be on the road... now just need someone to design a remote home button that I can mount on the center console or shift knob
Digital compass - nifty feature that enhances GPS
Video capture - record/display video taken from front of car (iPhone would be in a windshield-mounted dock)