I installed OS 3.0 beta on my 1st gen iphone using iTunes. It kept all my personal info, music (but only appear after resetting!) and applications.
Most of the new stuff works BUT it's quite buggy, I'll keep it for a day or two, but it gets annoying; the sound recording app sometimes freezes, it changes volume (why?), the phone app also had a few hiccups and I lost all sound a few times (after using the phone and the recording app), this is not the same "usual" headphones bug, it just mutes all and no "headphone" shows when you change the volume level. On this old iphone it seems a bit slower, the message app (previously "SMS") sometimes takes a few seconds to appear, sometime it kicks in immediately. Copy and paste sometimes doesnt kick in (at least when I tried from Safari), most of the times it did.
So... a few apparently random bugs, some slowish performance and all the good extras promised (of course, I cant yet test pushing notifications).