I used a k800i before I got my iphone. They are both unlocked and I will switch out my iphone to the sony if I'm going somewhere where I would like to have a camera. I've always been a fan of SE, they make quality stuff.
The k800 does have a much better camera, and music sound quality wise, is superior. Except you need to use a crappy adapter. The external speaker is better in the k800, and the battery life is much better. However the iphone is better in pretty much every other category, the iphone is a better actual telephone, is syncs easier, the internet is better, the ipod features are better, organizational software, email, txt. That's all the important stuff.
I use a pay as you go sim card, and use a iphone app called truphone. This allows me to place cheap wifi calls whenever i'm in wifi coverage.