you are asking this in an N1 forum? seriously?
Well I just made the jump to the N1 and i'll tell you the iphone does media much better with itunes. The iphone has a more "intuitive" UI.
However, you will get bored after a while. You can't customize, you can't multitask, applications are tightly controlled by apple.
Thats where the N1 comes in. For the average consumer I'd say iphone is better, but if you are a geekier guy that likes to tinker with his gadgets and try new things then the n1 is for you.
When N1 hits verizon, the network will also be another HUGE plus.
I second everything said above, with one caveat, if you are game to Jailbreak your iPhone, then the iPhone has many more options and features to customize at this time. I have a jailbroken iPhone and I currently can multitask and switch between running apps using backgrounder and proswitcher. I have been bouncing back and forth between the jailbroken iPhone, an HD2 and the N1 and while I love all three phones, the killer for me is the keyboard on the iPhone, it's simply hands down the best on screen keyboard bar none. In the keyboard comparison, the iPhone wins, HD2 comes in second (responsiveness and size of keys) and the N1 is a distant 3rd.
Additionally, the apps stores are of no comparison. the only app I found on Android that is as good as those on the Apple App Store is SportsTap. The Android market and apps do not yet have the polish and completeness that apps on the AppStore do. I believe Android will close the gap, but it's going to take a little while.
The other killer for me right now is that the N1 does not fully integrate with my companies Exchange environment. I've been hunting for an addon that does the trick but while Moxier and Touchdown are decent tries, they are not as complete as the iPhone integration with Exchange, which already had some problems. I'm hoping that Google wises up and realizes if they want business users, they need better exchange integration, but with their corporate push for Google Apps, we may never see that and if that is their strategy you will see a very slow adoption of Android in corporate america. Also, the N1 is a pain to use out in the bright sun, the iPhone kills it there too.
With that said, I'm looking forward to hearing what Apple has to say next week on iPhone 4.0. I'm also waiting patiently for the Verizon N1 since I'm hoping that perhaps Verizon will convince Google to fix some of their issues with Android (most notably Exchange Integration) and you could have me leaning more towards android. plus there is that Network comparison between Verizon and AT&T...it's kind of like the comparison of the iPhone keyboard to the N1...Verizon kicks AT&Ts ass.
To conclude I do feel that Android is here to stay and if Google can find some way to fight the market segmentation that is happening with the platform, it could close the gap seriously on the iPhone. The hardware that the N1 is based upon and the build quality of the N1 blows the iPhone away, but the OS on the iPhone is still more polished than Android, but Android is young and there are a lot of programmers backing it up. So time will allow it to close in on the iPhone if Apple doesn't keep pushing forward hard.
I think if Apple doesn't get the iPhone landed at Verizon before the end of the summer, then the iPhone will be passed rather quickly by Android in the coming 2 years. If the iPhone lands at Verizon this June, and Google doesn't get Android segmentation handled, the iPhone will pretty much rule the US Smartphone Market for some time to come.