I have a non-contract iPhone 3G and the only force pushing me to upgrade it is that it's been abandoned as far as OS security and bug fixes go (I gather its SSL is now insecure: https://issl.recurity.com/ ).

Despite what the blogosphere seems to emanate, the existence of faster devices doesn't render the older ones unusable.

I have an iPhone 3G, and the upgrade to iOS 4 did render it unusuable. I hear they've fixed it in later OS updates but it's just an Angry Birds player for my kid now.

But I agree with your main point. I switched to an Android device that had even less processing power than the 3G and I don't really see much need to buy a new phone until this one falls apart.

The iOS 4 release with improved performance for the 3G has been out for a long time now.

I think "until it falls apart" is a healthy approach to ownership. I plan to do the same with my MBP. Part of the reason for buying quality items of all types is that they happily last.