I've used an iPhone to read several full length pdf ebooks. It's a good experience, except for three rather significant gotchas. Screen size, surprisingly, is not one of the places where I have problems (though I admittedly am pretty tolerant of small text sizes). The iPhone's super-sharp, high dot pitch screen helps a lot, along with the infinitely resizable zoom and the ability to view some apps in landscape orientation.
The problems:
1. Getting files onto the machine is kludgy. You can post your pdfs to one of the free document hosting services like readdle.com and view the documents in Safari, but you have to be online. There are also a couple of somewhat messier methods for storing files locally to avoid the need for a net connection. I've used a couple of these -- they're functional, but they're definitely not ideal or carefree. You can also email a file to yourself, but the PDF reader in the mail program is much less suited to reading since it can't be turned to landscape orientation.
2. No bookmarking. You will have to manually page forward to wherever you left off. Not a problem with short documents, but a pain when you're looking at a full-length book.
3. Limited file size. Safari (which is the best built-in pdf viewer) has a file size limit of about 8 meg. Larger pdf files simply won't load.
I suspect all three of these issues will be solved once developers have full access to the machine's capabilities this summer.
If you'd like to see the iPhone in action viewing different kinds of pdf content, I posted a video along with instructions on how to store files locally:
http://wowio.wordpress.com/2007/08/0...oks-the-video/