With the 1.0 firmware, you can only use the Apple headset to talk on the phone with the headphone jack. (You can't, for example, use a car stereo like a speakerphone by plugging it in to the headphone jack.)
However, the 2.0 firmware apparently changes this. I just tested it, and the results were very different than the last time I received a call in the car.
Here's how I was set up:
Standard headphones (Samsung earbuds)
Hardware: 1st gen phone
Software: firmware 2.0
I called myself from another phone, and the call rang in my earphones. I answered with the slider on the phone's screen. I could hear the caller in my earphones. The caller could hear my voice picked up by the iPhone's internal mic.
This is really a cool solution for people who use their iPhones to listen to audio while driving, too, since it should essentially turn your car's stereo in to a speakerphone. I'll have to get someone to call me when I'm in the car this afternoon and try it out. 🙂