Tethering an iPhone is the worst deal you can go for. That's the wacky iPhone contract on O2 in the UK.
Tethering my HTC seems to work just fine - I've not been charged a penny (yet) for using it with my laptop. It comes within the "reasonable use" unlimited Internet.
However, I understand a USB dongle is a lot faster. £100 for 12GB for 12 months doesn't look all bad. I don't know if they'd offer a 2-month deal (or whatever).