I have started to use a combination of my iPhone 3G, Trails (an iPhone application which is £1.19) and HoudahGeo to GPS tag my images. I have to say it works really well and provides an accurate set of positions.
You align the Camera and iPhone times, set Trails running for your trip. When you have finished, you email yourself a GPX file (from within the application). Drop the images onto HoudahGeo, then drag the GPX file. The two are married up and you write the data to the EXIF.
I posted here
http://inside-lightroom.com/2008/12/14/iphone-and-geolocation/ about it and the App's author has posted some info too
http://trails.lamouroux.de/geotag-photos-using-iphone-trails.html.
Richard Earney