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the iPhone will force WM to get better faster.
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I agree with that :)
Microsoft has announced a better "full html" browser. Hopefully, it'll be better than PIE is now.
Yes, iPhone can run 3rd party apps, but the power apps that WM has grown to love (and hate), IMHO, will never come to the iPhone, simply because of the simple user interface (which I love).
And to what someone said about forcing software on you: I would rather have MobileSafari forced on me then PIE. Same with Mail. Same with Weather, same with iPod (which pwns TCPMP), same with SMS, same with... well, you get the idea.
One thing WM will definately need to get now is multitouch. It is incredibly useful.