The new iPhone — awkwardly named 3G S (since shortened to 3GS, no space) — went on sale in New York at 7:00 a.m. EDT. This is my live blog of the event from the glass cube of Apple's (AAPL) Fifth Avenue store, posted in reverse order with the most recent items on top.

8:00 Inside the store, the processing of new customers seems to be proceeding in an orderly fashion. There are scattered problems here and there, including reports of extended activation delays, but in general it's a vast improvement over last July, when Apple's servers crashed under the load. (Apple learned its lesson and put a couple days between the launch of iPhone 3.0 and the release of the 3GS.) Last year, after two hours trying and failing to get my then-new iPhone 3G activated in the store, I finally left and did it from home. This year I'm heading back to Brooklyn empty handed. I'm not going to buy a 3GS until I can get the full discount in December.

7:45: Wrapped up my interview with CNN International. A kindly Apple PR person has taken pity on me and let me behind the lines to get power, Apple Store Wi-Fi and access to a men's room. The official estimate of the crowd when the doors opened, she tells me, is 300 people. [UPDATE: By the time someone talked to the New York Times, Apple's count had grown to 400. Piper Jaffray team counted 350, and senior analyst Gene Munster now thinks his prediction that Apple would sell 500,000 units the first weekend might prove to be "conservative." ]

7:18: The first customer to emerge with an iPhone 3GS is immediately surrounded by reporters, photographers and TV camera crews. I might have made a better picture, but it would have meant walking away from my MacBook.

7:02: The gates open, the crowd starts moving forward, our Jersey boys are at the head of the line. It's a relatively orderly and civilized affair, for an iPhone launch. The employees in their blue and orange T-shirts showed great restraint, no running down the street like madmen, whooping and screaming. Just steady clapping as the customers march down the stairs in groups of 10 to pick up their iPhones. (I've posted a 76-second movie here.)

7:00 Crowd roaring. Whistles. Clapping.

6:55: Apple employees gathering under the big round staircase, getting ready to go crazy. From time to time small roars erupt from the crowd for no apparent reason. The TV crews are lined up to get the first people in line.

6:45: The crowd now fills 8 twists of the maze; I estimate it at about 220 people.

6:40: The tension has started to rise. I'm afraid I might get booted out of my perch near the corner of the cube, where I'm getting a weak Wi-Fi signal from inside the store.

6:38: Security guys have started to lay out the crowd control tape. I recognize the heavy who roughed up Daniel Bowman Simon, the environmental activist who was first in line for the iPhone 3G last July. I guess Apple was not unhappy with the job he did.

6:28: The clowns have started to show up. A guy in body-size iPhone costume and a cardboard sign urging people to recycle their iPhones; a pair of lovelies in lime-green Gazelle shirts; two guys offering to buy old 8GB iPhone 3G at $200 a pop. Lots of cameras, two TV trucks with masts and one with a satellite dish.

5:58: Two Apple employees in red shirts are manning the entrance to the barricade maze, sending newcomers to one line or the other, depending on whether they have a reservation. Apple seems to have anticipated a larger crowd than they are getting because the maze is clearly too big. Guys in black shirts are removing the extra ones, perhaps the reduce the impression that the turnout is small. Carlos, the Apple employee manning the front of the line, assures me that they have plenty of units in stock. I think he may be right.

5:53 There are two lines, reserved and nonreserved. I count 61 in the reserved, 48 in the other, for a total of 109. The last person in the reserved line, joining it with a little more than an hour to go before the doors open, is Saadiq Akal, 30, a financial analyst from Mill Basin, Brooklyn. He has an iPhone 3G, but he wanted to get the new model. Why did he come so early? "I wanted to get home and get some sleep."

5:50: Sam Epstein, 18, from Montclair, N.J., is first in line. Two of his buddies have gone to find a bathroom. One of them — Keith Hobin, whom we interviewed Thursday — had to go home. Spending the night on the pavement, he said, wasn't too bad. "I managed to get a couple hours sleep."

5:49 Dawn at the Fifth Ave. glass cube. There's a small crowd bunched together on the 58th St. side.

5:43: Approaching Fifth Ave. station. Wondering how the boys from New Jersey — whom we last saw huddled under big black umbrellas loaned to them by the Apple Store staff (see here) — fared overnight.

4:55: Waiting for the R train to Manhattan.

4:45: Out the door. Thursday's rain has stopped. The sky is already lightening over Brooklyn.

4:30: File my first story of the day: "The iPhone 3GS stripped bare in Paris"

3:40: Boot up. The New York Times online has stories about Democrats scrambling to scale back health care reform plans, the deepening confrontation in Iran and the Continental flight from Brussels that landed safely with a dead pilot in the cockpit. E-mail from Rapid Repair tells me they have posted the first iPhone 3GS teardown from Paris.

3:00: Alarm.

Apple (AAPL) isn't scheduled to release the iPhone 3.0 until Wednesday, but like a lot of Apple watchers, I've been living with the Gold Master version for the past week. (It's available on the Web if you know where to look.)

The new firmware is a significant improvement over the old, but not in the ways I had expected. Cut & paste – the feature I'd lobbied for most heavily — can be a lifesaver, but it's not something I've used a lot so far. Ditto for landscape e-mail.

On the other hand, I find myself depending heavily on features I'd never thought much about — like Safari's new password autofill.

Apple's list of the top 20 new features of the iPhone 3.0 — starting with Cut, Copy & Paste and Landscape Keyboard — are listed on its website.

These, however, are the features that have been getting the heaviest use around my house:

1. E-mail search. Spotlight search, which lets you search the entire contents of your iPhone, has been getting the most attention. But what I've been using most is the search bar that appears at the top of my e-mail inbox. If what I want to find isn't among the 50 e-mails stored on my iPhone, the search engine digs into the thousands of stored on my server and starts working its way through those.
2. Safari autofill. Any browser worth its salt ought to be smart enough to remember the name and password you use on the sites you go to most often. I don't know why this wasn't available on the iPhone from Day 1, but now that it is I find myself visiting sites I had avoided because I was either too lazy to enter the password or too absent-minded to remember it.
3. Automatic Wi-Fi login. This is a real timesaver if you spend a lot of your life in airports, Starbucks (SBUX) and other places with Wi-Fi hotspots that refuse to remember your mobile device from one location to another.
4. Find My iPhone. I haven't really needed this yet — I'm pretty good about keeping my cellphone close at hand — but this is the feature I demonstrate the most because it's just so cool. If you have a Mobile Me account and you misplace your iPhone, you can see the phone's location on a Google (GOOG) map and send it a pinging noise and a "please return me" message. If it's lost or stolen for good, you can hit a kill button and remotely wipe all your data — passwords, secret phone numbers, embarrassing photos, etc. If the iPhone comes back home, just plug it into your computer and all your data will be restored.

I have two complaints with Find My iPhone, however: 1) it's turned off by default, something a lot of users probably won't discover until they've lost their phones and it's too late to turn it on, and 2) for reasons I don't understand, it only displays the iPhone's location within a one-block radius. See below:

Between Wi-Fi triangulation and GPS, Mobile Me ought to be able to locate the device to within a few yards. Seems like an easy fix. I'll be watching for it when iPhone 3.0 goes live officially on Wednesday June 17. The new iPhone 3G S arrives two days later.

When does it make sense to upgrade to the new iPhone 3GS that Apple (AAPL) unveiled Monday?

That depends when you bought your first one. (This assumes you already own an iPhone; if you're happy with your current phone, you can stop reading here.)

If you are one of the 270,000 customers who bought one of the original iPhones in June 2007, your two year contract with AT&T (T) is about to expire and you can buy a new iPhone starting June 19 at the same subsidized price paid by new customers:

• 16GB in black or white — $199
• 32GB in black or white — $299

As opposed to the discount price AT&T is offering "valued customers" who upgrade early:

• 16GB in black or white — $399
• 32GB in black or white — $499

Or the full price for existing AT&T customers listed in Apple's fine print:

• 16GB in black or white — $599
• 32GB in black or white — $699

If you are one of the nearly 6 million owners of a first generation iPhone still working off your original AT&T contract, the new iPhone is a big enough improvement that you'll probably want to get one as soon as you become qualified for the subsidized price. You can check your eligibility at Apple's website: http://buyiphone.apple.com. You'll be asked for your phone number, zip code, e-mail address and the last four digits of your social security number. If you are not yet eligible, the program will tell you the date when you are.

If you are one of the 15 million who bought an iPhone 3G after it went on sale in July 2008, the decision process is a little more complicated. The new iPhone is better than the one you own — faster, longer battery life, built-in compass, better camera that can shoot video — but not $400 better. To use high-tech's biggest cliche, it's evolutionary, not revolutionary.

Much has been written about the extra $200 to $400 Apple and AT&T are charging existing customers. TechCrunch's MG Siegler calls the new phone a "sucker's bet" because it locks you into another 2-year contract with AT&T at a time when Verizon and Sprint are rolling out 4G networks that could support the iPhone. Siegler thinks AT&T would be wise to extend its customers an "olive branch" to keep them under the tent:

"Sure, they would have taken a hit, probably a fairly big one, but … it’s really only $200 per customer — AT&T makes that off of me in two months with my bill. And if they do lose the Apple exclusivity, they will effectively be losing $1,200 (one year’s worth of bills) that I otherwise would have been paying them.

"Instead, basically what it sounds like to most current iPhone owners is AT&T saying that, 'we love you as a customer so much that we’re going to make you pay an extra $200 for this new device since you stuck around with us.' "

I was among the 1 million people who bought an iPhone 3G the first weekend it went on sale. My two year contract has another 14 months to go. But when I run my numbers through Apple's eligibility app, I find I can get the new-customer price six months before my contract expires. On Dec. 12, 2009, to be precise.

Which is why I'm waiting until Christmas.

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