Clearing out the old iPhone

Just back up your 3g and sync, connect your iPhone 4 and restore from back up of your 3g . go into your 3g and select settings, general, reset, erase all content and settings. That will delete information from you 3g

Sync your new Iphone4 with Itunes (do a restore to your new phone, it will ask) It will make your new Iphone 4 just like your 3G in regards to Pics, IPod, Content, Text Messages, mail, etc.
Then you will need to wipe your 3G manually by going into setting and selecting "reset phone"

I wouldn't reset your 3G first by any means, that's a good way to lose everything. Do it last after you make sure your Iphone4 is the way you like it.

The two post above are correct. One other thing I would say is you may want to make sure you don't have any extra iphone backups/profiles in itunes that will confuse you when you pick which one to restore to you new iphone 4. Go to itunes - preferences - devices and you will see list of backups etc.

question* what is the advantage of restoring vs. setting up iphone4 as new?

Restoring
Pro: Restoring will make it so that you don't have to remember what you had on the old phone.
Con: If there were any issues, it may carry over (though can usually be fixed with a network settings reset).

Setup As New
Pro: Brand new phone, with no issues (except those that it would naturally have).
Con: Will have to fully set up the phone afresh.

What if I don't want to restore to my new iPhone 4 from the previous iPhone back up, but only want to upload the existing apps?