I don't agree that this is a myth.
If you look at the first generation iPhone in a vacuum, it was limited, perhaps (but I think there are plenty of arguments that the first gen iPhone was pushing envelopes - name one other phone that had a fully functioning web browser at the time, and pinch/zoom felt magical), but nitpicks about functionality aside, I don't think this framing makes sense for other reasons.
A product line is not just its initial release. It is a process, an organizational discipline, a manufacturing and logistics pipeline, an ongoing upgrade cycle, an ongoing engagement with customers, an understanding of the market, etc.
When the first generation phone was released, plans for the 3GS were already well under way. The 1st gen phone was a necessary step to get you that 3GS. When operating at Apple's scale, at least a decade of roadmap if not more was already planned in depth. The 3GS was not a reaction to the success of the 1, it is the real product Apple envisioned and planned to ship before we even knew the iPhone would exist.
If the 3GS got it right, so did the gen 1, in a certain sense.
And as an aside, I have to say I really liked my 1st gen iPhone compared to everything else I'd had up to that point, and I was a gadget junkie who had owned quite a few of the other "hot" phones at the time.