Here's the big deal:
When I went to create a backup of my phone before the install, it said my iphone refused the backup. After some handy googling, I discovered I was not alone.
You must install the latest iphonesystemcomponents.pkg file. It was a bit tricky to track down, but I found it here. Just close iTunes and run the installer package. Viola, you can back up your phone. Then download the latest firmware (employ googling) iPhone2,1_4.0_8A260b_Restore.ipsw.
After restoring from the backup, I didn't get the error I received on the first beta.
I was tempted after the first quirky beta to restore back to 3.1.3, but decided to stick it out- basically because I got married to a few features that I wasn't willing to give up. Those features are:
- unified inbox and threaded messages
- multiple exchange accounts