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I also use the Books app to read ebooks on the iPhone. I like the application much better than I thought I would. The small screen is not ideal, but the resolution is good, so the eye strain is not too bad. The multitouch scrolling works quite well with ebooks in my opinion. Set the iPhone to "Airplane mode", turning off the network and WiFi functionality, and the batterry will last for several hours.
I will soon be an owner of the Sony PRS 505. Looking forward to buying books in the MS lit format, converting then loading the book both on the Sony Reader and on the iPhone when i need an ultra portable option.
Sorry John, I did the jailbreak from an older iPhone software version, so I cannot give you the step by step for the newer version. You could try looking on TUAW.com for more details.
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