I've had iPhones since they were introduced, passing down earlier models through the family - my soon-to-be 90 year old mother still uses my old iPhone 3G, my Dad (88) has an iPhone 4; I'd say a 4 is the base level for a usable device - a few years old now, yet still capable of running the newest version of iOS when it comes out in September, albeit a reduced feature set.
I bought a refurbished iPhone 4 from
http://www.refurbiphones.co.uk/ for my daughter (~6 months into a 2 year Blackberry contract, sigh) a couple of months back and we’ve been very pleased with it. She had her contract SIM cut down to fit, and is currently in Vietnam, happily blogging, texting and emailing from it. She travelled to France with it last month, again, without any problems.
Bear in mind that there'll be a new iPhone around September / October, so everything will drop down a step in the product line i.e. the 4 will likely disappear from the line-up, with the 4s as the new entry-level - or the product line could change more radically if they introduce a lower cost handset.
Personally, I'd wait until autumn, but if you have to buy now then I would buy refurbished, from a dealer - that way at least you know the battery has been at least checked thoroughly, possibly replaced, and it will probably come with a warranty of some kind. Whichever route you decide to take, make sure you buy an unlocked handset, or one that can be unlocked easily - that way you can pick any cheap SIM option that suits you, or pick up a local SIM if you're travelling.
HTH Pete