I think its already been mentioned once before - the iphoneTextReader
- Its free
- Available via Cydia - not the apple appstore yet
- Reads a variety of formats including Read large (non-DRM) eReader, Mobipocket, RTF, PalmDoc, Plucker, HTML, CHM, PDB, PRC, FB2 and Text eBooks on your iPhone/Touch
Version 2.1 for firmware 2.0 is out a couple of days back. Its amazing for freeware and owes a lot to the original Books.app
It has its own limitations, but so far its been the best freeware reader for the iphone I have found, though I havent tried Bookshelf and Stanza. You would need a jailbroken iphone for this.
My main pain - it does not have bookmarks (though it does remember where you stopped reading) and so far does not sync with any desktop. To copy files you need WSCP and Wi-fi.
It even caches files after the first read so that they load faster the next time.