I recently made such a decision between the 770 and a c1000.
I decided on the c1000 because I thought the 770's processor was too slow, I also didn't like that it uses obscure rs-mmc cards. Also, I liked that the Z had the keyboard and USB host capabilities (for expansion), it also can use CF devices. The 770 didn't seem very expandable, apart from Bluetooth. I don't own any bluetooth devices, but I do have USB keyboards, mass-storage devices, etc. So for me, that was a no brainer. Also, I use wired networking more often than wireless, since I wired my house. I don't think you can even use a wired ethernet adaptor with the 770.
The things that the 770 had going for it were the slightly wider screen, flashplayer for its browser, and you can buy them outside Japan. The integrated wireless/bluetooth are a plus for some people. I didn't need them right now, but I may eventually, so I figured I could always add them to the Z when I do.
Also, Nokia announced that they are working on two successors to the 770, they may be more compelling
Also, on the integrated HD vs Flash issue. Sure the HDs are more fragile, but the microdrives I hear are built to take quite a beating. Don't forget that flash memory has a more limited lifespan and is generally slower. Neither is perfect.