Yes, it lives up to the hype, in the sense that it’s better than any other phone I’ve owned or played with (mostly Palm OS & Windows Mobile devices).
Some things aren’t terrific though. I mean, it does have shortcomings, just fewer of them than other devices I’ve had experience with. :)
For instance, one thing that still bothers me a tad is the keyboard – I was a good thumb typist (30–40 words per minute) on my Treo, and while I’ve gotten better over time, I can still only to probably ~20 wpm on the iPhone keyboard. I also miss copy/paste.
I have a few friends who’ve also moved to iPhone from other smartphone platforms (including Blackberry). Their opinions are much like mine: there are a few shortcomings which irk them, but overall they’ve been pleased with their decision, and have no plans to move back to their previous platform.