The only issue might be privacy. Your phone book is full of people, 90+% of whom probably do not have an iPhone. On Facebook, every one of your Facebook contacts has clearly already divulged to you that they are on Facebook.

Still, I imagine if Apple made an opt-out method of automatically friending all of your email contacts who have iPhones (or at least an opt-out method of seeing them) it would be popular.

Seems to me like their "Game Center" thing might address this. I personally avoid Facebook, but if I look at my iPhone and can see that 3 of my friends are playing a particular game, I would be influenced much the way I imagine folks who receive Facebook game invites do.

Actually, I'd probably be influenced more, since I know some Facebook games force you to recommend it in order to get access. But if this game center, like XBox Live, can just show me what my friends are actually playing... that's the best endorsement they can give me :)