Given a choice between not watching a movie or watching it (for the 2nd or subsequent time) on an iPhone, I'd still pick the latter. It certainly helped me kill 2+ hours when flying from Kelowna to Montreal last year!
Granted the best way to see a movie is on a large, high quality screen, but films not all films NEED a large screen. I thinking specifically of character driven drama rather than the latest action blockbuster here: obviously something like The Avengers really needs a big screen for the best impact.
To use an audio analogy: watching a film on an iPhone is akin to listening to low-res digital. But given the choice between listening to music you love using that method or not at all, which would you chose?