How much do you like your SMSs/Notes/Call History/Camera Roll/...
I'm just gonna set it up as new and have a clean slate. Please reply though for future people who might search for posts/threads with this title. Thanks guys.
As I see it, anything that is sync'ed on (so music, videos, podcasts, contacts, calendars, e-mails, applications from the iStore) will go straight back on with the first sync whether you select restore from backup or set up as a new phone. What I do not think will reappear if you choose set up as a new phone are things such as previously sent and received SMSs, call history, saved wireless networks, notes and photos stored in the Camera Roll (as opposed to photos taken with the camera, downloaded into iPhoto and then reuploaded to the phone via Photo syncing in iTunes). Personally I really want the SMSs in particular to come across (photos I can get via iPhoto, notes are nice but not essential, previous call history is something I can live without).
Of course, if you have already Jailbroken the iPhone you can copy off the required databases, set up as a new phone and then restore the databases remembering to chown the files as mobile:mobile after coping them back on (as you will copy them on as the root user but they need to be writeable as the mobile user and I suggest powering off and on again afterwards to just to be safe.
Alternatively if you have a recent backup of the phone via iTunes (see folders inside ~/Library/Application Support/MobileSync/Backup) you can retrieve the databases from there by following the instructions at
http://www.tuaw.com/2007/08/22/howto-restoring-your-iphone-notes-from-a-mac/ (substituting in different locations on the iPhone when restoring the files for the newer firmware, so mobile not root, and different databases, e.g. /var/mobile/Library/SMS/) - note this still needs a Jailbroken iPhone to restore the databases to it (just not to get them in the first place) and will need the chown'ing as above.
Just my 0.02 GBP...
Alec