I don't know if there are other options, but you can use google talk to send and receive text messages to/from someone's phone (either through the browser, or if there's a standalone iPhone app).

I like FRING.

I've considered ditching our text plan in favor of chat apps, but then if someone sends an SMS message to my mobile #, it's a bit of a hassle to reply.

I have chat apps for Yahoo, AIM and gChat and an SMS plan (it's part of my blackberry data plan). The chat apps are free, and I find I am rarely on them. If I want to text someone, I'll send them a text.

Does your gChat app work with the google SMS capability? If you can get your friends to use that as your txt #, wouldn't that effectively replace your need for SMS plan (not that you have a choice with the blackberry plan)?

Not sure, but it's a app produced by google.

I just use the low end text plan at AT&T (I think it's $5 for 200 texts), I rarely exceed that number as with the iPhone I seem to do more email, or tweets, than texting - but that's just me. AT&T does have unlimited texting for $20, but so far when I go over the 200 it still is only costing me a couple bucks.

If you buy the iPhone at an Apple store, how does the activation work?

I use both SMS and Twitter mainly. That and email is much easier way of communication with the iPhone. I have the minimal phone plan as I don't talk much on it.

They can port and activate at the store. Go to apple.com/iphone/buy and prequalify before you go to the store. Makes it easier.