Turn off Spotlight. Go to Settings, General, Home Button, Spotlight Search and just turn it all off. iPhone 3G is so resource constrained Apple wouldn’t even enable wallpaper. Indexing Spotlight in the background seems to be the straw that breaks the performance’s back. With Spotlight off, it’s a usable device again.
via How to improve iOS 4 performance on iPhone 3G | TiPb.
Ever since upgrading my iPhone 3G to iOS4 it’s run like a dog. I’ve found the advice above has helped a little though. Considering I never use Spotlight I’ve lost nothing by doing it.
Update (29/07/2010): It seems Apple are starting to pay some attention to this issue: