It's certainly possible to develop on a Windows machine, in fact, my first application was exclusively developed on the old Dell Precision I had at the time :)
There are three routes;
- Install OSx86 (aka iATKOS / Kalyway) on a second partition/disk and dual boot.
- Run Mac OS X Server under VMWare (Mac OS X 10.7 (Lion) onwards, read the update below).
- Use Delphi XE4 and the macincloud service. This is a commercial toolset, but the component and lib support is growing.
The first route requires modifying (or using a pre-modified) image of Leopard that can be installed on a regular PC. This is not as hard as you would think, although your success/effort ratio will depend upon how closely the hardware in your PC matches that in Mac hardware - e.g. if you're running a Core 2 Duo on an Intel Motherboard, with an NVidia graphics card you are laughing. If you're running an AMD machine or something without SSE3 it gets a little more involved.
If you purchase (or already own) a version of Leopard then this is a gray area since the Leopard EULA states you may only run it on an "Apple Labeled" machine. As many point out if you stick an Apple sticker on your PC you're probably covered.
The second option is more costly. The EULA for the workstation version of Leopard prevents it from being run under emulation and as a result, there's no support in VMWare for this. Leopard server, however, CAN be run under emulation and can be used for desktop purposes. Leopard server and VMWare are expensive, however.
If you're interested in option 1) I would suggest starting at Insanelymac and reading the OSx86 sections.
I do think you should consider whether the time you will invest is going to be worth the money you will save though. It was for me because I enjoy tinkering with this type of stuff and I started during the early iPhone betas, months before their App Store became available.
Alternatively, you could pick up a low-spec Mac Mini from eBay. You don't need much horsepower to run the SDK and you can always sell it on later if you decide to stop development or buy a better Mac.
Update: You cannot create a Mac OS X Client virtual machine for OS X 10.6 and earlier. Apple does not allow these Client OSes to be virtualized. With Mac OS X 10.7 (Lion) onwards, Apple has changed its licensing agreement in regards to virtualization. Source: VMWare KnowledgeBase
Phone to phone communication via bluetooth seems like it will terribly useful for some apps I am writing. No longer do you have to input all the data you want to store yourself, you can share some of it with other iPhone users.
Best Answer
All apps submitted to the AppStore now have to be 3.0 capable. Luckily the iPhone market is pretty cutting edge and will get the updates. If they are downloading apps, they are probably updating their OS.
If you are planning to launch your app immediately I would say go with 2.2.1 but if you are looking out greater than 3-6 months then go with 3.0 stuff. There are lots of great things in 3.0 such as virtual goods, apis to control itunes music and other benefits. If you app requires features of 3.0 just start developing for it now. 1.0-2.0 seemed to take about 3-6 months for people to update.