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I just upgraded from the first generation iPhone to the 3G iPhone. The Touch is basically the same thing without a phone and a few other features.
Safari works great. The small screen really isn't an issue because of the way to can pinch and squeeze the pages. About the only real issue is no support for Flash or JAVA.
Mail also works great.
Watching movies on the iPhone is surprisingly good.
I rarely carry my laptop with me anymore because the iPhone does mail and web browsing so well.
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