I had to vote "No" based on the question because it will not be a "whiz-bang electronic reader". However, does it really have to be a "whiz-bang electronic reader" to be successful? I do not think so.
Think about it. It is not like the iPhone is a whiz-bang phone or even a whiz-bang audio player. However, it has provided the best solution for all these functions in a device that can go with you wherever you go.
So while it may not be a "whiz-bang electronic reader", it has the potential to become the most used device for electronic reading, outside the mainstream computer. In fact, it might already be. While people may not be reading e-books on their iPhones right now, they are already reading a lot with it. They are reading email, stock quotes, weather, web sites, etc. What would keep people from reading e-books on the iPhone?
While the iPhone will not be the best way to read a book, I have a strong feeling that it will be good enough for most people. Thus, it will be very successful in delivering electronic books to the masses. Of course, you will always have other options available.
By the way, for those who do not have an iPhone or iPod Touch, the ability to scroll text on the screen using your finger is a totally different experience than using navigation pads, buttons, and/or scroll wheels on other devices. The user interface for the iPhone is a lot less disruptive than that of other devices, especially when reading. I believe this is a huge advantage for the iPhone/iPod Touch that is often missed by people who do not own one.