iPhone as a music player....same as iPod??

Can the iPhone be used as a docked player the same as the iPod? Is the sound quality the same? My 3 yr old Blackberry is on its last legs and I need a new smartphone. The iPhone's 32gb storage capacity is plenty.
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Mitch just purchased 32g iPhone for my wife. I've been playing the iPhone through 2009 Toyoata Venza car stereo (RCA input only no iPod/USB input option) and it sounds pretty good. I've also have my older iPod and I could not tell the difference.

Side Note: I loaded my iPhone contacts and wifes contacts from her iPhone via bluetooth into the GPS/Audio/Communication center very easily. Next I will be listening streaming audio or wireless-audio protocol from the iPhone.
Thanx Lapierre. Please post your streaming audio results when you get the chance, that is my primary interest in this device. I'd like to know how it sounds hooked up to your system.
Yes it can. I have had a little bit idiosyncratic performance on the Wadia dock but straight out of the headphone jack no problems at all. It has a little bit brighter crisper sound than the ipod classic 120gb which can be both a good and a bad thing. Also occasionally you will get some strange feedback because of the cell phone signal coming in and out (you can always turn that off) but other than that it does function perfectly fine as an ipod and if you can live with only 32GB I don't think you really need another ipod.
Quick observation Mitch.

I listened to my iPod and new iPhone 3G via B&O BeoSound 1 and I did not notice any major difference. I thought the bass was fantastic and the midrange while playing very loud was excellent on couple of John Mayer songs recorded live.

Note that the IC used for BeoSound 1 requires 5 pin DIN connection which makes average RCA to mini ipod cables pretty lame. Plan on purchasing Analysis Plus iPod/iPhone cable (Silver Oval) for the Venza.