Things that should be changed by Apple, but will be instead be changed by way of hacks, (and many of these will eventually be embraced by Apple)
The most famous early iPhone hack was the ability to activate the iPhone and use it as an iPod and wi-fi device without activating the AT&T service. As Steve Jobs says, the iPhone is still by far the best iPod they've ever made, and with wi-fi around, it's very useful as a web and email device and PDA. Since AT&T isn't allowed to discount the iPhone in exchange for a two year contract, it's not cheating anyone to use the iPhone without the phone functionality, so Apple really should come around and let you use it sans-phone, but I think it will be a while. In the meantime, there's the hack. We'll see how much effort Apple puts into shutting down the hack with future upgrades.
Probably the most sought-after hack that people are working on is the ability to "unlock" the iPhone or allow it to be used on another GSM network. Since the iPhone can't be used at all in any country not served by AT&T, there are a lot of gadget freaks that would love to buy it on eBay and put their own SIM in. Eventually, Apple will be supporting other carriers in other countries, and after its contract with AT&T runs out in a few years, it may offer an unlocked device, but until then, an illicit hack is high on the priority list.
Tethering, or using your mobile phone as a "modem" for your computer, is a very useful feature, especially as networks become faster. Though the iPhone's EDGE network is not fast, sometimes you're on the road, and you just need to connect your laptop to the internet. In this case, the ability to tether the iPhone would be great. Future versions of the iPhone will undoubtedly support faster, "3G" networks, and hopefully tethering through Bluetooth would be supported. Until then, this hack allows for tethering with EDGE (over wi-fi).
Astonishingly, the iPhone has no way of accepting a custom ringtone, either over the network or through a PC sync. Surely Apple is hard at work developing a buy-ringtones-on-iTunes application. Because this is a potential moneymaker, as it is for many carriers, Apple may try to weasel out of letting you upload your own ringtones. But too late for them! (there's a hack )
The iPhone's SMS tool is very elegant and useful, and looks like the Mac's iChat. Unlike iChat, it doesn't do instant messaging. The iPhone has no instant messaging capability. For now, we'll have to make do with one of the several web-based IM tools. Developers were quick to create iPhone-formatted IM tools, and they work great, but lack the utility that an integrated IM tool could have. I suspect that very soon, the SMS tool will be replaced with an iChat tool that supports SMS, MMS, and IM. Will the IM support "push" instant messaging? In other words, will people be able to IM you when the IM app isn't active, like how you will be notified of an incoming text message if your phone is on? I should hope so, though I'd certainly like to be able to turn it off or only let certain buddies cold-call me via IM.
If we're going to count web-based IM as a "hack," we'll have to mention all of the many web-based apps out there that make up for fundamental iPhone shortcomings. Unfortunately, though there are more and more web-based apps out there, most of them are just customized skins for displaying web data, such as weather, Digg stories, movie times, local events, etc. Some of them are very handy, but they're just glorified web sites. There are a bunch of good games, though, which addresses a genuine shortcoming. There are a couple of web-based document editing apps out there, like iZoho and Google Docs, but their usefulness on the iPhone is still hampered by a combination of iPhone shortcomings and their lack of customization for the iPhone.
One feature that many people would love to have in the iPhone (and iPod) is the ability to quickly rip a DVD to iPhone format and upload it, just like you can with a CD. If the only way to add music to an iPhone were to download it from iTunes, I would not own an iPhone. Though I appreciate the fact that Apple has made an easy-to-use way to find and legally buy music, I prefer to rip music from CDs or find new music online on my own. I would never re-buy an iPhone formatted video that I already owned on DVD. The entertainment industry already suckered me once when I had to re-buy all the music I owned on cassette on CD, and that was somewhat reasonable because it was a big step up in quality. I'm not going to pay again for a smaller, more-compressed version of a movie I already own, regardless of what the DCMA says. Lucklily, there are many apps that make it easy to rip your DVDs and convert them to iPod format. I suppose this qualifies as a "hack," since Apple is legally bound from making this easy officially.
I tried out one app that both rips the DVD and converts it in one session, called DVD to iPhone Converter ($35), that was simple and elegant. However, it took a long time to convert a DVD. Even with a new Intel Macbook, it took a couple hours. I also tried using two separate tools, MacTheRipper (Free, OSS) and VisualHub ($23). Even though it required two steps and a lot of disk space (MacTheRipper rips the DVD only to its full DVD-quality size, then the other app actually pares it down to iPhone size) it was much faster, taking as little as 30 minutes for both steps. Both MacTheRipper and VisualHub suffer from geek overload, though. They are so powerful and customizable, that a regular guy like me, who just wants to rip a DVD to iPhone, has a hard time deciding which of the fiddly buttons and menus will give the best results. This is one case where, unless there's a sea-change in US law, Apple won't be able to embrace the hack, and you'll always need a third-party workaround for DVD ripping.