The iPhone camera is good, and especially so in the latest iPhone4 incarnation.
But, the software shutter button sucks. A lot. It works well enough when you’re staring into the LCD, but many of the shots I take are without looking at the screen. Meaning it’s difficult to hit the shutter button without messing up composition.
In a perfect world, I’d be able to use one of the hardware buttons as a shutter release. Failing that, a larger click target would be nice. I regularly accidentally flip into video mode, or switch to the front camera, or open the photo library, when fumbling to hit the button. The handy (and free) GorillaCam app handles this nicely (and offers some other great features, too), but the native camera app should be a bit more friendly to actually taking pictures in the field.