The phone is dead. After a couple of months with my Treo 650, which integrates a Palm PDA and a phone, I'm convinced. And equipment manufacturers are releasing more and more smartphones that integrate similar functions, meaining I'm not the only one who thinks this way.
One of the big differences is the availability of a real keyboard. I never used my cellphone for anything except phone calls because of the incredible awkwardness of using a ten button phone keypad for text. It's not accident that Blackberries are popular--they were one of the first portable devices with a full keyboard.
Another big advantage is a larger screen. Cellphone screens tend to be small, and have actually gotten smaller over time. It makes using any of the packaged applications awkward and difficult. My Treo has a large, bright, easy to see screen that is big enough to use comfortably for things I never would have bothered trying to do on a cellphone screen.
I think over the next three or four years, the traditional phone design will fade away. We will see fewer and fewer models available, and they will be mostly "basic" phones--good for kids or as an extra phone line, but most of us will have a well-designed multipurpose wireless device that works just about everywhere, makes phone calls, connects to the Internet, has email, a Web browser, and lots of useful applications and services. And it will play music.
One thing it won't do? It probably won't take pictures. I'm guessing that we will see more and more smartphones that won't bother with a camera feature--it's a gimmick that most people are figuring out is only marginally useful. And cameraphones are being banned in many places--locker rooms, government facilities, even some businesses (too easy to take pictures of sensitive information).