Hi dvdgremlin
Welcome to the eForum
The 1gb usage is for use on the phone itself, this cannot be used for tethering. The settings are different at network level to access them both, so it is identifiable if either have been used.
If you sign up for the 500mb for £5 tethering extra and go over you then get you would then be charged per mb, it is always best been on the option that would cover your usage
Then network has to create the software etc so you can actually use these services so it wouldn't be possible to change these for an individual user
The iPhone is a hsdpa handset so it should get the same speeds as the dongle, but until it is released on the network we wouldn't know the answer. Also it is an area dependant with how good the signal is.
If you do cancel the contract it is based on the line rental for the remainder of the contract not including any extra services like tethering or insurance etc
Regards
Martin
eForum Team