Firmware update wishlist.
Home-screen - drag-n-drop reordering
File manager with Leopard CoverFlow and QuickLook
Expose window switching
Get rid of the rolodex/dial interface and replace with something better
USB drive option
(Essentially start turning the iPhone into a Mac OS X computer. Would really require 256 MB of RAM so probably won't happen until iPhone gen 2)
Keyboard based contact search
Flash (2 minds about this; wonderful for embedded flash movies, horrible for adds and those stupid movie websites)
Video recording at 480x300 H.264
Have a few
Sync with Outlook, blah blah
Instant messaging option
You can go on and on and on.