After some research regarding portable recording devices I came across the Blue Mikey microphone for iPod/iPhone as a possible candidate.
Meantime, the updated version, mark II (or 2.0) of the Mikey was released. The new release include mini-USB in jack as well as a 3.5 mm stereo line-in connection as well as a different design. Mikey 2.0 is not fully supported in iPhone 3 or 3GS but it works without flaws with the Blue Fire (paid version) app for iPhone. I have tested recording my band live in a 20 sq meter room on the setting for lowest sensitivity and it doesn't distort or break up. In short, the sound quality is good with a decent bottom-end although the stereo separation is not great. It may be worthwile experimeting with different angels/direction for recording live music. For use as a table mic for interviews etc this will not be a problem. The package includes a soft bag for transport but a hard case would be better for protection and this fact removes a star in the rating. Great product with a decent price-tag and will serve you well as long as being restricted to iPod or iPhone recording is not a problem. A welcome future upgrade would be a generic USB connector with optional iPod/iPhone adapter.