A 300+ dpi screen should make text extremely crisp.
EDIT: Here's a closeup of new vs old.
That's nice and everything, but like I said, I've never had trouble reading text on my iphone and it was never even a concern for me. And while I like resolution in general (I have dual 24" monitors), I see no real resolution benefit. I'm still gonna have to zoom in to read websites. Even thuogh it can fit more stuff on the screen, the text will still be tiny, so... bleh. All that other crap they do like zoom in on pics and stuff in the video is irrelevant to me. If I want to look at pictures, I'm going to do it on my desktop. the video phone is admittedly kinda cool if you have family and kids and ****, but there's nobody I really want to do a video call with.
Now battery life is a tangible benefit, and while more is always nice, i can live with what I have. It's certainly not worth paying hundreds of dollars for the new phone when i have a 3gs.
The upgrade probably makes sense for someone with a 3G, but not with the 3GS imo.