My wife and I have an iPhone. My biggest, and really only, complaint is about how it works as an iPod.
When she is driving and I'm in charge of the music, she says "Next" a lot. You have to press the Home button, then slide to unlock, then press the small Next button all to go to the next song.
(EDIT: As comments noted; also doing double-click the Home button and look to see the Next on the screen too. But still, you've got to look at the screen.)
Hopefully somebody at Apple is listening...add Locked iPhone Gestures.
Let me press the Home button, then "draw" commands with my finger on the "locked" screen. Simple shapes to tell it go to the next song or other commands. If it was me, I'd do a > shape like the button in the UI for next. Two fingers sliding down to do II that would pause. < to go back. I'm sure you could think of more...and it would be awesome.
And while you're at it, when playing an audiobook, the little slider to move back and forth in the book is way too sensative. For a 5 minute song it's OK, but a 2 hour book jumps minutes at a time. Again, you add Gestures. The good old "circling finger" as if I was using an old style iPod would be perfect to scroll forward and backward in the track.