I'm always completely honest with the customers, I'll tell them I'm biased towards Android and if they phone back and speak to another person they'll get completely different answers and the next person will also give them a different answer as there's no such thing as a best phone.
I think the iPhone is a great gadget, I'm always honest in saying it's a great choice if you want something that just works, but I see Android as a happy medium between iOS and Blackberry. Your average non-technical customer doesn't need an iPhone, they also don't need a Galaxy S2 or a Nexus.
On our network you are paying for the name, you can get a Galaxy S2 for less than the iPhone 4 8GB (not even the 4S) and you're getting more minutes with the S2. If I'm speaking to someone who just uses their phone for calls and texts and doesn't want anything else neither of them would come into the conversation unless the customer brought them up anyway as a feature phone or one of the low end Android handsets would do nicely.
Mainly the iPhone comes up in conversation because it's the one phone everyone knows, I'm happy to discuss the pros and cons of any phone with them, but I'll also be up front about the cost (around £900 over 2 years to get the phone for "free", that's with no data and at least two times more minutes than your average customer needs). Normally when I'm discussing Android it's as a replacement for a feature phone and they'll end up with something like the Galaxy Ace or the HTC Wildfire S, Windows 7 phones are cropping up a bit more these days.
In general terms based on my experience people who want iPhones will stick purely to iPhones, people who use Blackberries will normally stick with them too, you'll get the occasional person who will stick to one specific brand, but most often people see it as iPhones vs Blackberry vs Everything else.
In terms of issues we get with phones we get amazingly few issues with malware, they may go undetected or it might just not be a massive issue, I'm not sure.
My advice to friends and family is always to take out a SIM only contract and buy whichever handset they want outright, it's going to cost more up front, but you'll save a lot in the long term.