An Apple employee confirmed to us that iOS 4.1 is coming out later this week which will fix the iPhone Reception problem. Surprisingly many people are in doubt if it is hardware design issue or software problem, the answer, which is confirmed by this Apple employee, is both.
According to him, many users who reported to have upgraded their iPhone 3G and iPhone 3GS to iOS 4.0 were also facing this reception issue. His claim can be confirmed by the video which is embedded below.
iOS 4.1 will fix how software handles fluctuations in signal quality, the current iOS 4 is not handling this fluctuations well. Those users who cannot wait any longer can try out their luck by asking for free bumpers at their local Apple store, according to this Apple support employee, some US stores are handing out free bumpers. Excerpt from the chat is below;
So there you go, try out your luck before its too late. If there is no Apple Store in your neighborhood, wait for the update which will out later this week.
Update: Just got the latest scoop, the problem is both software and hardware. This Apple employee confirms that it is a major design flaw from Apple. Even after upgrading to the latest firmware, he was still having reception issues on his iPhone 4.
Update 2: For clarification and more leaks, check this post.