Here are my thoughts as a Droid owner of about 4 days:
Pros for the Droid (vs. iPhone)
(1) Google Account Integration - works great (calendar, gmail, tasks, and especially chat).
(2) Maps/Google Navigation - The built in app does turn by turn directions as well as any dedicated car GPS I've seen, and the "search for lunch along the way" uses Google maps, so it's leaps above a regular GPS.
(3) Nuts and bolts of the OS - the Droid has great features built in for checking what percentage of the battery each process is draining, which apps are running in the background and how much memory they're using etc.
(4) Keyboard - the Droid feels very solid even with the sliding keyboard, and the ability to use keyboard shortcuts and dedicated buttons is fantastic when navigating the necessarily limited interface of a smartphone.
(5) Multitasking - works great, you can switch between chat, browser, app market, metro map app, random stupid game app, and they (almost) all remember where you were and remain responsive the whole time.
(6) PC uploads - connect the USB and you can copy music/video/whatever onto the Droid much easier that I've ever seen anyone do it on the iPhone.
(7) Speaker - the Droid seems much louder and easier to hear when watching youtube videos at lunch or listening to nav directions in the car.
(8) Contact Integration - automatically consolidates phone, gmail, facebook and other contacts into one list. Automatically pulls their facebook/gmail photo to match the contact info.
(9) Removable battery/storage
Downsides for the Droid
(1) Pinch Zoom - apparently there are patent issues, so while the Droid (and some apps) can physically use pinch zoom, the built in browser/email/etc do not have it. Using the Droid zoom for text works great because it fits to the column size, but viewing webpages with large pictures is somewhat painful.
(2) Copy & Paste - much easier on the iPhone, all you do is long press and you can adjust the borders of the copy after the fact. In Droid, text copy requires either a keyboard shortcut or a 2nd level menu option, and you have to get it right the first time because you can't adjust the selection.
(3) App Selection - must of the functional apps exist in the android market, but the selection (especially games) is simply wider and of better quality on the iPhone.
(4) iTunes - as much as I hate iTunes on a personal level as a slow and limiting PC application, there simply aren't any Android apps that I've found that handle media as elegantly as the iPhone.
Since it looks like Android popularity is only increasing, and given the theoretically more open system, I have little doubt that workarounds/new apps/new OS ROMs will take care of the Droid shortcomings I listed.
Is it an iPhone killer? No, but that's a dumb question. The real question is "Which smartphone is better for me?" iPhone handles music better, has more app selection and is more sleek and polished. The Droid is more open, handles google accounts better, has a keyboard (but doesn't need it) and has a lot of room for improvement in the future.
Would I recommend the Droid? Absolutely, I love it. Is it better than the iPhone? If your style of smartphone usage plays to its strengths, then yes.
Retracted it feels much better than the iPhone, extended the keyboard is still rock solid. The Droid can supposeldy do line-out, I haven't tried that yet. I do know that there are ~$30 kits for the iPhone to control it through your car's reciever - hopefully the Droid will sell enough to warrant the same support down the line.
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