The coolest open source hardware project I’ve seen to date is the TuxPhone + Open Cell Phone Project.
The Tux Phone is a GSM cell phone you can build from parts, originally developed by Surj Patel. Apparently he got into a Hulk-like Rage one day in 2005 and, fed up with the state of available cell phones, decided to make an open source hardware cell phone! It’s not sexy or tiny, but you can build it yourself. And that means that if it doesn’t do what you want, you get to make it better!
The Open Cell Phone project is the other half of the project, and provides a Free operating system. I’m not sure if the TuxPhone project is still alive today, unfortunately, but I think it’s pretty awesome!