I absolutely loath taking pics with my iPhone 4. The noise level is just horrible. Even on a sunny day with good conditions the noise levels are just unacceptable to me. I have night shots at ISO 3600 (550D, not a pro or semi-pro body) that have far less noise than my iPhone in broad daylight.
The shutter lag is something I just can't get used to. I think I could send a kid to China and raise him to 18 years old and still be faster than the shutter on the iPhone.

I will say the video (720p) is actually quite good for a cell phone. Low light is not so great, but with such a small sensor that is to be expected.
The connectivity is nice, but honestly there is no pic that is so important that I need to upload it to Flickr or Facebook immediately. Most images I like to run through a bit of post processing, so posting immediately is secondary to making sure the image looks like I want it to. Granted, in the Facebook era, most only care about getting an image out there (even if it is out of focus or a horrible shot), not about the quality of the images.
It is light years ahead when it comes to connectivity and in-camera adjustments. This is where it beats even a DSLR and what most people want.
Are you saying the in-camera adjustments beat a DSLR, or that the connectivity beats it? If the former, I don't see how an iPhone could be more complex than a DSLR when it comes to shooting options (unless they are talking about in camera post-processing stuff).