Remora Project
I have now tested the search engine on an iPod Touch. The code and software is available here.
In summary there are 2 search engines. One does a Yahoo! search and allows you to add PDFs to the local search engine. The basic idea is you can easily add documents to your device and find and read them later using a search engine. Even if the iPhone had a way to download and browse documents it still does not solve the problem that some people give very random names to their PDF files. With the search engine you don’t need to wory what the filename is as you just search on its contents.
If you have a delicious account you can configure the live search to use it. It will then highlight any results in your search that match sites from your delicious account.