The Apple store was partially helpful. Here's what I learned. There is a moisture detector in the bottom of the headphone jack that changes colors when the iPhone has been submersed -- kind of like a litmus strip or pregnancy test. It seems that for some odd reason, submersion in water nullifies the warranty.
Anyhow, the will offer instant replacement with a new iPhone for $249 as part of an "out of warranty" service agreement. While that's about $200 less than a whole new iPhone, it's still enough to make me think twice.
So while I'm ruminating on my dilemma, I've taken the SIM card and put it in my old iPAQ so at least I've got phone service. If I don't get the iPhone back up-and-running soon, I will probably spring for the replacement.
Rumors are that the new 3G versions will be announced on June 9th. I might wait until then and see if I can get one of those!