UPDATE 10/12/2011: My experience upgrading my iPhone 4 to iOS 5 was very different, it went flawlessly. It’s a phenomenal upgrade. My iPhone 4 runs faster and I have more functionality, what’s not to like? Want to know how to work around a slow iOS 5 update? Read Anticipating a slow iPhone/iPad iOS5 update?
If your iPhone OS 4 update hangs, read on: My iPhone update to iOS 4 downloaded quick enough then the process seemed to hang on “backing up”. The progress bar was farther along on my first attempt but after a couple of hours I felt something was wrong so I canceled and started over again. Two hours in I’ve barely made any progress.
The Restore process described here worked well for me. Your milage may vary. My apps, music in playlists, movies, photos in albums, contacts, calendars, email accounts and contents were all restored. Restore brought back all the app data I care about like Shazam tags, Flight Track info, Geocaching saves — and I remained signed in on FaceBook, Urban Spoon, Qrank and many others besides (Pandora excepted, I had to sign in again and I had to key in my PIN number again for AT&T voicemail).
FOLLOW UP: Here’s a story which blames Spotlight for the sluggishness Turn Off Spotlight Search For Performance Boost on iPhone 3G Under iOS 4.
WARNING: 3G owners beware, iOS 4 slows things down and I would not recommend it to you — especially since most of the new features won’t work on this model (but folders, threaded emails and a unified inbox does work). 3Gs users seem to happier with performance and benefit from most of the new features. I strongly suspect that my battery life is now also worse.