I just got a Blackberry Curve yesterday. I've had a chance to play quite a bit with the iPhone and I find that the two devices offer distinctive, different and yet valid approaches to the user interface challenge.
While the Curve does much more than the iPhone and costs less, it does not support direct manipulation and rich data visualizations/transformations that the latter offers.
The user experience of these two devices is thus fundamentally different, and cannot be generically summarized as a form over function issue. Yet, as usual, it ends up being the CONTEXT of use that determines acceptable usability trade offs.
Direct manipulation is most effective when one can concentrate on the device with both hands and visual focus. It is less effective when one is involved is other activities like driving or excerscsing. So if the context of use IS the iPhone, direct manipulation makes sense.
Marshall McLuhan's "The Medium is the Message" comes to mind. The iPhone's user interface is the focus on attention, not the actual task that is expected from the device as a phone. This is a contradiction to good ui design that, at least in my mind, needs to be transparent to the user.
Whis entry is not a critiscisom of the iPhone. Realizing we are in an evolving world where a shift is taking place from hardware to software, to Human.