We reported a few weeks ago that Steve Jobs said an upcoming update would resolve slowdown issues in iOS 4 for iPhone 3G users. We assumed he was referring to Apple's upcoming iOS 4.1 update, and indeed it looks to speed up iPhone 3G performance, according to this video comparison from Lifehacker.
The video demonstrates both operating systems performing the same tasks -- including general Maps, Photos, and Safari usage -- on an iPhone 3G. iOS 4.1 seems faster overall, but the only major improvement is in the Maps application. Other tasks seem only marginally improved. Lifehacker adds that it's still much slower than running iOS 4 on an iPhone 3G S or iPhone 4.
For iPhone 3G users who aren't yet ready to upgrade and want the fastest experience possible, iOS 3 still seems to be the better option. If you're a sucker for the new features in iOS 4 (which are limited to begin with on the iPhone 3G, since it lacks support for multitasking and wallpaper backgrounds) then iOS 4.1 is your ticket.
There will likely be further speed improvements down the line for the iPhone 3G, but since it's now a discontinued model, I wouldn't expect Apple to invest too much time in it. And given that it sports a much slower processor than more modern iPhones, and a paltry 128MB of RAM (compared to the 3G S's 256MB, or the iPhone 4's 512MB), there's only so much Apple would be able to do to eke out more speed.