I have a 3GS. I've read that there are issues with the iOS4 update.
Would it be a good idea to wait a bit before updating

It's been fine on the 3GS for me and the 3 others I did for friends/family. It's the 3G where it can be a problem (or sluggish) for some apparently.

If you're worried you could try a 'restore' (which does a fresh install) instead of an 'upgrade', as that seems to go much smoother and quicker.

edit: I also found that rebooting the phone after you've copied everything back onto it also can help.

Tbh I'd wait.

Go for it, its absolutely fine. I've been running it for ages and no issues.

I've got a 3G. Currently downloading the update at snail's pace but am scared I'm going to lose everything when the update's installed? Am I right in thinking that my phone will be backed up to the computer before the update is installed?

You won't lose a thing, it backs up the phone before it does its update

By now I'm sure you have encountered the sluggish 3G performance with iOS4... if so make sure & do the restore - my 3G was virtually unusable after the update but a quick restore made things much better

I updated my Iphone 3G to iOS4 a few days ago just before my Iphone 4 came, it was a bit sluggish and unusable at times with certain Apps on my phone and whilst browsing the internet with Safari, just decided to wipe it and did a clean restore haven't reactivated the Handset yet.

I've not bothered to update mine, as I've heard that there are many problems with the 3G with 4.0 OS. Anyhow I'm going to see if I can locate a iphone 4.0 this weekend (not hopefull) and just do an early upgrade so not interested in the update.

Took the plunge - updated - no problems - hooray !!!!