I've never owned a phone (including the 2007, 2008 and 2009 iPhone) that when holding it in a normal and natural position causes the signal to degrade that severely 2 blocks away from a tower. Being that my primary use of the device is for data services, the degradation is very noticeable. I'll be keeping the device though, since the tradeoff of getting a case is much easier to live with then dealing with the issues of trying to go Android.

I wonder how much testing was actually done with the bare phone out in the field. We all know about the lost phone, and it was in a case designed to make it look like the older models. It's very plausible that none of the field testers ever held the naked phone out in public the same way the masses are now using the device.

The good news though seems to be that the iPhone 4 is holding up much better in the dense environment of New York for actual phone calls. http://www.engadget.com/2010/06/25/the-jimmy-fallon-test-is-the-iphone-4-dropping-less-calls/
Even Brian Lam (of "we must bash Apple due to our own felony class mistakes" Gizmodo) was quoted in the New York Times as saying even with the antenna issue, he is able to use it as a phone in his house, something he had problems with on all previous models and AT&T.