The iPhone camera is good, and especially so in the latest iPhone4 incarnation.
But, the software shutter button sucks. A lot. It works well enough when you're staring into the LCD, but many of the shots I take are without looking at the screen. Meaning it's difficult to hit the shutter button without messing up composition.
In a perfect world, I'd be able to [use one of the hardware buttons](http://www.geek.com/articles/apple/camera-app-gives-the-iphone-the-hardware-shutter-button-it-always-wanted-20100811/) as a shutter release. Failing that, a larger click target would be nice. I regularly accidentally flip into video mode, or switch to the front camera, or open the photo library, when fumbling to hit the button. The handy (and free) [GorillaCam app](http://joby.com/gorillacam/) handles this nicely (and offers some other great features, too), but the native camera app should be a bit more friendly to actually taking pictures in the field.