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I do all of my reading in stanza on my iPhone. The small page size hasn't bothered me much, but then I use a relatively small font size, turn on hyphenation, and modify unruly books to remove extraneous left/right margins (some are really, really bad, like adding 1em left and right margins -- that's fine for a larger device like an iPad, but it kills on the tiny screen).
I have several other options for ebook reading, including a Sony PRS-300 and an Augen android tablet, yet I keep coming back to my iPhone because I always have it with me. At this point I've probably read close to 40 novels on my iPhone (at least 20 that I've tracked through calibre, plus handful more in Stanza prior to using calibre and at least that many on the old Fictionwise ereader before making the switch to the superior epub format and stanza reader). Prior to getting an iPhone, I read books on an old Windows CE palm device from 2000, so pretty much my entire decade-long history of e-reading has been on small devices.
I'll probably replace my iPhone at some point within the next year, either with a Windows Phone 7 device (Freda is out, so now I'm just waiting for decent hardware on better providers than AT&T and T-Mobile) or an Android device. The only reason I haven't switched to an Android device already is because I still have ~8 months left on my iPhone contract and so may as well wait for another generation of phone hardware and the 3.0 OS. Regardless of what device changes I make, I will continue to read ebooks on small-screen devices as my primary method of reading.
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