As my colleague, Phillip Elmer-DeWitt reported this weekend, the iPhone 4 has a significant issue that might be able to be fixed with a software update, it might not.  We’ll see.

But that’s only one of the many issues that new iPhone owners are griping about.  Even though Apple (AAPL) today reports selling an incredible 1.7 million iPhones since launch, the iPhone 4 shortcomings may open up a door for Google’s (GOOG) Android.

Besides the ‘Death Grip’ issue which occurs when you hold the iPhone normally with your left hand, Apple also moved the proximity sensor above the speaker in the iPhone 4 causing many users to drop, hold or mute calls accidentally.  Additionally, the front and back glass screen has been accused of making the iPhone fragile as well as being easy to scratch.  Finally, the yellowing of pixels and other strange manufacturing errors have emerged.  The iPhone 4 is flawed.

As Dan Lyons satirically points out on his Fake Steve Jobs blog, the communication coming out of Apple is insulting.  Telling people they are holding the phone wrong is degrading.  Nokia has taken this meme and run with it, saying that you can hold a Nokia phone any way you want.  I’m sure we haven’t heard the last of that.

As pointed out by Elmer-DeWitt, there has been some speculation that a software update would fix this problem.  That doesn’t seem likely, but even if it does, the damage is already done.  And while software might be able to mask the issue, the problem seems very likely to be a fault of the hardware design, something Apple took great pride in.  In fact, Steve Jobs spent a few minutes at the introduction of the iPhone 4 to laud the new exposed stainless steel antenna.

Apple, the company that could do no wrong, has released a flawed piece of hardware, no matter how beautiful and thin it is.  You’d have to be pretty drunk on the Apple Kool Aid to deny that.  The news of the flaw(s) is mainstream, and even people who don’t follow gadget sites are aware of these issues.

So, will Apple’s prospective customers flee to Android?  It is certainly too early to tell.  Andy Rubin announced last week at the Droid x launch that Google was activating 160,000 Android phones/day.  While that doesn’t compare favorably to the iPhone 4’s launch total of 1,600,000 in 3 days, there is only one launch a year for Apple, while it seems like new Android devices are hitting the streets every day.

Also, why didn’t Apple give stats for the full week since deliveries started arriving on Tuesday?  Surely they would if they had reached 2 million?

If you had a Droid Incredible or an iPhone 4 in your pocket right now and had an important email or phone call to make:  Which one would you choose?

For those on the fence about whether to go iPhone or Android, these latest hardware flaws and Apple’s response to them may push them in Google’s direction.

For those of you who wonder (and have made it this far), here’s me testing my iPhone 4 vs. 3G (blurry, sorry).

[youtube=http://www.youtube.com/watch?v=dXLiRA6qLA0]

Don’t believe me?  Try this:  It is magic!