I just downloaded Palringo, a multi-service IM client for the iPhone, and I'm happy to say it works quite well and has a few features which I think are worth writing about.
First, I added a Jabber account from my personal server and it didn't have any problems connecting. This isn't always the case as some clients out there have been made mostly for gTalk, and have trouble adjusting to regular Jabber servers which use a slightly different port. After I did that, I could see my IM contacts and was able to start chatting. If I have mutiple IMs going at once, it let me easily see if I got a new message, and to flip back and forth either with a flick, or by clicking on a button at the bottom which turns into a message icon.
The couple cool features are the image send function - I can just click a button in the chat and send an image from the phone, which is nice (and it worked as it should). And the integrated Groups feature is very cool as well, I liked that I could have group chat right on the phone (like I was talking about yesterday). I didn't see any groups, so I made my own and it sat empty. That's too bad, it would have been interesting to see if a conversation of iPhone users just spontaneously erupted. I typed in "iPhone" as a group name (good guess it turned out) and got a group, but it wasn't discoverable. That's a bit weird, but it may have been on purpose.
A few problems: First, the group discovery stuff. Secondly, there's no archive/history for the chats, so if you close it and come back in (which I did before I realized you could flick between screens so easily), your previous chat comments are lost. This is even if you haven't closed the application. What's also a problem is if you have the app running and the iPhone goes to sleep, it's not exactly clear if you've logged out or not (you have). Third, links that your contacts send aren't clickable(!!). Finally, access to the settings are, as Apple suggests, in the Settings app, not in the main chat app. The problem with this is that you can't turn off the new message alert/buzz while in the application, and have to exit it first.
Then of course there's the iPhone's limitation of no background apps. But that doesn't bother me as much as it's not Palringo's fault - and for the most part while mobile, I like to "actively" chat, rather than having IM on in my pocket because it confuses people. For that it'll work quite well. Plus, the app ate my battery life in the short time I was playing with it - so it's not something that you'd want running for very long anyways. Looking at the forums though, it seems Apple is working on a background solution for September? That I didn't know.
Anyways, compared to yesterday when I didn't have a Jabber IM solution, this is much better and more than a good start. I should probably try out the AIM one to compare, as I haven't yet, but it seems pretty great. They've got some bugs to fix, but all in all a nice little chat app.
Update: While hanging out in the iPhone chat room, someone started sending voice messages from their desktop, which played automatically. Very cool! It'd be great to have that "push to talk" feature on the iPhone - in fact it'd be a killer feature that I hope they add soon.