With the release of the Motorola Droid this month, Apple’s iPhone has its biggest challenger yet in the arena of do-it-all smartphones.

Available on Verizon’s 3G wireless network, the Droid is the first smartphone to run on Google’s 2.0 Android software.

I’ve been testing the Droid ($199) for a little more than a week and here are my impressions.

The great

Turn-by-turn GPS: The Droid offers the most powerful and seamless GPS system on any smartphone. The handset easily replaces stand-alone GPS systems which can cost around $150.

Web browsing: Using the Web on the Droid is the best experience I’ve had on a smartphone. Pages load very fast — much faster than on Apple’s iPhone.

Verizon’s network: In my testing on the Droid, I didn’t drop a call once — something that’s a daily occurrence for me on AT&T.

Google integration: Set-up on the Droid took minutes. Logging in with my Google account, all of my contacts were sent to the phone and I was ready to go. The Gmail integration was super clean as well. It’s the most intuitive, full-featured e-mail solution I’ve seen on a smartphone.

The good

The Android Market: Comparisons to Apple’s more than 100,000 apps are inevitable here. The Android Market has a little more than 16,000, but that number is growing. With fewer selections in each app I was looking for (AIM client, note-taking utility, etc.) the app that had risen to the top was rarely as polished as apps I’ve used on the iPhone. However, the marquee apps (Facebook, Twitter clients, news apps, etc.) all work just fine.

Battery life: In my testing, the Droid’s battery lasted just as long as the iPhone’s, but be careful you don’t have too many applications running the background. Battery technology has always lagged other technological innovations. As with any smartphone, it is important to always have a charger nearby.

The bad

The flip-out, physical keyboard: The good news here is that the touch-screen keyboard is good enough that you won’t ever need to use the physical counterpart. It’s a feature that consumers still demand as a matter of principle, but in reality the flat and tiny physical keys are very clunky to use.

Music and video: Using the Droid as a media player is clunky at best. Without a dedicated desktop application to sync and organize music, you’re left to drag and drop files into folders on the player yourself using your computer.

Visual voicemail: It’s a great feature, but it doesn’t come standard. Customers can download the visual voicemail app or free, but unlocking the feature costs $2.99 more a month.

Overall grade: B

While the Droid may not be the much-hyped “iPhone killer” that some claim, it is a compelling entry to the market. And with features like native GPS navigation and Verizon’s powerful wireless network, it is sure to attract many customers looking for a phone that can — almost — do it all.

Contact MARK W. SMITH: msmith@freepress.com. Follow him on Twitter: @markdubya or follow a feed of blog updates at @browserblog.