I'm in exactly the same boat, and looking at exactly the same phones!
I'd narrowed my choice down to the iphone4 or one of the HTC handsets. Android seems to get some good reviews generally, and you know the alarm clock will work on it
Was going to get one before christmas but decided to hold out until Jan in case some of the networks discount in the January sales. The iphone4 is a lovely handset, and i'd be chuffed to have one - but like you, i was finding it would cost a lot more up front to buy. The Desire HD also looks good, but its about a centimetre wider/taller than the iphone4 i think. Bigger screen is good for web browsing, but less pocket friendly.
Was thinking about the HTC Wildfire as its quite a bit cheaper, but having used one i've decided the screen is crap for web - far too low a resolution to be useable imo.
Ideally want to spend £20 or £25 per month tops, with no cash purchase of the handset.