Check this:
http://www.lexcycle.com/node/2052
2G and 3G iPhones can not open the file. They run out of memory, stanza crashes on the EPUB file. 3GS can open the EPUB file, no problem. If you load the .mobi file onto iPhone 2G and 3G via Kindle's iPhone App it opens perfectly well and is fast.
The creation of the Kindle-File takes 4 hours. The creation of the EPUB file takes 15 minutes.