well, I've always had the cheapest of the cheap pay as you go mobile, but have moved house and now don#t have a landlline, so thought it was worth getting the iphone. Yes I think it is worth it considering for the same no. of mins/texts its about the same costs as other touchscreen phones anyway. It is really useful to check email etc on the train/bus - means you can go in a bit later but not miss out on anything important. Although you have to watch yourself with the games :$
You have to be careful not to spend too much in the app store. most apps cost between 50p and £5 but if you buy a few you can easily spend £10-20 a month which can get expensive!
I don't know who is offering the best deal orange or o2, I'm on o2, but I heard orange impose an internet limit of 750mb I think (have no idea what that means!).