Hi, I just saw this message. I'm on Kauai now. My husband and I both have iPhone 4 and have been using them for the last two weeks here on Kauai. As expected, coverage is best in the larger towns. We dropped coverage between Hanalei and Haena and of course as mentioned earlier, driving up to the canyon. Coverage is also a little weak in places in Poipu. We can't get any coverage in our room at the Sheraton! But for the most part, you can definitely make calls and get email. Check for free wifi around too. It's here and there.
Kauai is my favorite of the Hawaiian islands, it's just beautiful, although a little rainy right now! I've put together an iPhone app that lists a lot of things to do, including farmer's markets, live music, activities, etc. You can see info and download at lat22.com or just search lat22 in iTunes store.
Some of my favorite places to eat that aren't super touristy, or are just really good:
Kalaheo Cafe (esp. breakfast, great coffee)
Malasada lady in front of Kmart
Plantation Gardens
Hanalei Taro & Juice Company
Verde
Bar Acuda
Harmura Saimin
Have fun!