Does Apple read the Feedback?

Not that Apple ever tells you, but I believe most of the first update was concerned with security flaws that had been discovered, which functionally is very important to most people. I doubt you will see any new functions until it is something like 1.1 rather than 1.0.1. And I'm not sure you will ever see some of the items you list.

"No offence, but the first update doesn't seem to actually done anything functionally."

Of course not! Update 1.0.1 was specifically a bug/security fix. It did not have to do much with features, if at all... although people are reporting of issues that have suddenly been resolved (low volume, BCC, correct battery gauge, etc.)... so as a bug/security fix, it was not expected to do anything functionally.

This has been harped on over and over and over and over and over again. If you don't think Apple listened to people, think again. Update 1.0.1 credited a number of people for finding security flaws ... serious ones ... in MobileSafari. If Apple had not cared, we would not have had 1.0.1 to begin with.

Just be patient, and updates to some of these features will come in time. Be prepared, though, no one knows at all if Apple will ever put out these features for the iPhone.

Do they read the feedback? Of course they do. However, that doesn't mean to say that they act on every suggestion, or even suggestions we might think would be the common ones.

The iPhone was designed to fulfill specific needs for specific reasons - Apple didn't leave features out by mistake. Any fool who knows a tiny bit about the cellphone market knows what features other phones have, so it's not like they were in the dark about what options other manufacturers included. What they clearly did was build a device that was different, to appeal to people who didn't much want the same feature set as they could get from anywhere else.

If Apple consider adding additional features it may be in part because a significant number of users ask for these things, but in all likelihood additional features that do get added will be in keeping with the product as it now stands rather than an attempt to make it just like everything else out there.

Actually, Besides the nifty touch screen, Safari, And the iPod function, The "Almighty iPhone" Does not have any other features that are not on the market already.

Since it's a phone, you would expect it have a number of core features in common with other phones now wouldn't you? However, the feature set as a whole is unique, the implementation of those features is unique and the underlying operating system and methodologies are unique. I'd say that makes the iPhone rather different. That's why many people bought one - because it's not just the same old tired metaphors so prevalent in the cellphone industry.

Saying 'Besides the nifty touch screen, Safari, And the iPod function' is like saying that beside the engine, transmission, bodywork and seats, a Ferarri is not much different from a chariot.

yes they do and here's how the feedback is treated. I know because virtually all companies do it this way.
1. All the feedback is categorized and totaled.
2. Marketing prioritizes the resulting list.
3. Engineering assesses what the resources and time frames
for each is.
4. Marketing then does a redo on the priority and negotiates
with Engineering.
Often Marketing has to trade off spending engineering resources on fixes vs new product developement. If a fix is deemed necessary to maintain or boost sales then it would get higher priority. Internally they typically have fix releases already scheduled before even shipping the first unit. Quality issues are driven back to the vendor supplying the defective parts. Reliability issues are typically an engineering issue and vie for resources as well.