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I read my first ebook on my iphone about a year ago and haven't picked up a paper book since!
Stanza is best, I find, for epubs; if reading txt files (and lots of other formats including pdf's) then Goodreader can't be beaten.
Bluefire looks really good, but I have had to abandon it because it crashes my iphone - a known issue which I hope will be sorted out soon.
Transferring books from desktop to iphone is a piece of cake; either using itunes or iphone explorer (but you need to jailbreak to use iphone explorer)
And we all thank Kovid for Calibre......
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