There is no problem for the phone to select the strongest wireless signal, 2G or 3G. Apparently all mobile phones do this all the time. This is common knowledge and is available to everyone.
However, iPhone is not just some mobile phone, it is smartphone. The difference is, that the 'normal' mobile phone only cares about the voice channel and might from time to time need to look for data connection when you decide to do something more extraordinary with it, like use it as wireless modem etc.
The smartphone and especially the iPhone is designed to use an Internet connection at all times. If can of course work as normal mobile phone -- just switch off Cellular Data!
The problem is really with the mobile operators. They do claim, for few years already 'perfect coverage' and they also claim that 'all their networks are 3G' -- while in reality this is rarely so. You may have perfect 3G radio signal, but since 3G is sort of mini-Internet, you may have very congested network. The voice may go trough, because it is typicallt highly prioritized in these networks, but data may not. And in many cases your phone will try repeatedly to send the same data packet.
Since any data transmission on your mobile phone consumes a lot of power, the battery will drain faster, if you are connected to a 'bad' network.
The 2G networks are different by design. They are more 'telecom' like, in that each connection is separate and when you connect, virtually nobody uses 'your' circuit. Ok, they may have some data congestion in the pipes, but this is extremely rare these days, because the backbone is usually fiber and much much faster than the wireless part.
So there may be many situations, where you may have better 3G *signal* than 2G, but worse 3G *network* than 2G. In these cases, the ability to switch off 3G will make your experience actually better, although your bandwidth will be limited to about 200 Kbit (EDGE) -- but it may be much more stable over time and definitely requiring less power from your device to operate.
This is true for any make mobile phone. Most phones from other manufacturers actually have much worse 2G/3G battery drain ratio. If you use your iPhone primary as mobile phone and use Internet on WiFi -- by all means, switch to 2G when iOS 5.1 becomes available.