SoundMeter should measure sound levels up to approximately 105 dB (peak), using the iPhone 3G's built-in microphone. Anything above that level may not be measured accurately.
Default sensitivity values should place the measurements within about 3 dB of what would be measured by a precision sound level meter, although the errors could be as much as 6 dB, or greater. If you have the means to perform a proper calibration, SoundMeter can be quite accurate.
However, if you need to measure sound levels accurately, with a high degree of confidence, you will need to look for a dedicated sound level meter that conforms to ANSI and/or IEC standards for sound level meters.