If you can, I'd do both: Making an iPhone-friendly website isn't very hard, and using the iUI will allow you to easily integrate a psuedo-iPhone interface. Th

If you can, I'd do both: Making an iPhone-friendly website isn't very hard, and using the iUI will allow you to easily integrate a psuedo-iPhone interface. Then, your iPhone application would pull in your iPhone website, while also providing the other functionality you want to include (location awareness, contacts).