use iphone as external hard drive?

In a word, no.

iPods support disk mode which must be enabled. Disk mode is not supported with the iPhone which is likely due to security concerns.

I have the Air Sharing app and it works this way. It does cost $4.99 but well worth it. The app store does have numerous file sharing apps. I'm not sure if any are free though.

there are two free apps available on the app store called 1.Files Lite and 2.Discover which let u put files on the iphone as if it were a backup device. It can even open files like word, excel and pdfs. the transfer mode is via wi-fi. u cannot do it via usb. when u launch the app, if the phone is connected to a wifi network, either ad-hoc or lan, it will give a url. from ur computer's browser type in this url and a sweet interface will open up showing u files inside that app and it will let u add or delete files in the app.

enjoy!

box.net is another app that may work for you. It allows you to store files on their server and read them on your iPhone. Works well for MS Office files and PDF files. The only negative I've found is no landscape mode and it cannot handle password protected MS Office files, although I suspect the last issue is due to the iPhone itself and not the box.net app.

I use Air Sahring as well, but I used to use the following program.

http://www.digidna.net/diskaid/

It works excellent, but I was tired of always having to install it on PC's I wanted to use my iPhone with. Definitely give it a go if you're only dealing with a few computers.