Question: Does the new iphone 3gs take decent videos, and are the pictures that much better too?
Answer: Having just purchased an iPhone 3GS a couple weeks ago, I'll answer this first-hand. The photos are much better with the new 3.0 megapixel auto-focusing iphone camera, and the 30 frame-per-second video recorder is surprisingly good.
I'll start with the video. It's easy to take good video when you have a nice steady tripod and a slow moving area to record. But that'd be way too boring.
Instead, how about a front row ride on the Timber Terror roller coaster at the Silverwood amusement park? I happened to be vacationing there this week with my family, and was able to snag a front row seat on this fast and bumpy thriller. Here's the video I took (picture me holding onto the front rail with my left hand and holding even tighter to my new iPhone with my right hand).
Here's the original 39 MB Quicktime movie file that looks quite a bit better then the one that was uploaded to YouTube: timber-terrror-silverwood.mov
Here's the YouTube version:
That's pretty good video quality in my opinion, and the roller coaster ride was a lot of fun too (except for the 2 girls screaming in my ear right behind me).
Videos are recorded in Quicktime .mov format and can be uploaded directly to YouTube from the iPhone, or sent to your friends via email.

As for the iPhone 3GS camera, here's a shot of Stonehenge that I took on the drive home, up on the Washington side of the Columbia River (click for full size).

Sky shots with large areas of a solid blue color show up bitmapped in lower resolution cameras, but you can see the sky looks great in this shot.
The increased 3.0 megapixel camera resolution and the built-in auto focus is a definite improvement over the older 2.0 megapixel camera from the iPhone 3G. Still missing is a flash, so forget about taking pictures in dim or dark areas, and there's no zoom either.
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