Iphone processor is actually decent. Compare the iPhone (400Mhz*) with the Nokia n770 (233mhz) or the Nokia n800 (320Mhz).
But Apple shipped the iPhone with a vulnerable version of the libtiff library and didn't bother updating it for the 1.1.1 release. This libtiff exploit can be triggered through the iTunes Music Store by anyone who can MiTM the WiFi connection (or run a fake access point).
Number of hacking attack on mobile devices growing very fast.
On Iphone every process runs as root. MobileSafari, MobileMail, even the Calculator, all run with full root privileges. Any security flaw in any iPhone application can lead to a complete system compromise. A rootkit takes on a whole new meaning when the attacker has access to the camera, microphone, contact list, and phone hardware. Couple this with "always-on" internet access over EDGE and you have a perfect spying device.
Hacked Iphone -- what a great gift it can be.
my 2 c