You guys seriously act like this is some kind of crazy new technology that people are asking for. It's been done by plenty of other companies (eg Palm does it in WebOS). If the battery is low, refuse to install the update until it's charged about X%. If the user's on a call, refuse to install the update. Warn them when they start that the update will take XX minutes, and if they have an emergency in the middle of that then they're just SOL.
The one and only reason that the iPhone doesn't do OTA OS updates is that Apple hasn't chosen to implement it. I personally don't care one way or the other, but I think they'd be doing themselves a favor to go the OTA route. Would save theirs and AT&T's support people a lot of time dealing with the types that haven't connected their phone to iTunes in 2 years.