Nexus One is over hyped...still can't compare to the iPhone
iPhone users should stop comparing every phone that comes out to the physical phone in their pocket and instead focus on the processes Google is talking about here.
The vast majority of conversation yesterday was about the openness of the Google handset, it's development process, and the Open Handset Alliance. Nor is the phone going to be exclusive to one carrier (it's on multiple bands even!).
iPhone users should hope that competition in this form will lead to a much more open iPhone process.
Google isn't taking on the physical phone in the short term (after all, they didn't design the phone or it's hardware - they just market the phone), they're going after the broken mobile phone process in the long term.