We've (DH and me) both got the 32GS, because we have very generous father (in-law). If we were buying it ourselves we probably would haven't have bothered, but now we have it I couldn't live without it, I use it for everything! (checking weather before deciding to do a clothes wash, checking e-mails, directions to friends houses, nosing on google maps as to what that fancy house is on the hill over there (thinks you need the GS for that but not sure), making a note of timings when trying to get DS into a new routine) I love the fact you can click on a phone number on a website and it dials it for you and you can cut and paste between text messages, e-mails and the web so easily, although it does mean I forget who has e-mailed me and who has texted.
We did consider other smart phones but decided that the app store on apple just couldn't be competed against by any of the others yet, hopefully google will catch up eventually but I reckon it will take a while (at least the length of our contract anyway)
We went with o2 because it was the only one offering unlimited internet at a reasonable price, be careful as some of the carriers count both the 3G and the wireless access in your internet allowance, which seems a bit off if you're using your own wireless network.
Once you've got one you will wonder how you survived without it, but be warned, once you have one you'll be hooked!