I thought about getting the Instinct, but honestly, I don't think I could get used to a touch-screen keyboard. That was the deciding factor for me. The dust issue sucks and there's nothing you can really do about it, except take it apart and reseal it. I'm not sure how it even passed QA from Motorola, but it seems most electronics are getting cheaper these days. The good thing is that you only notice it in direct sunlight, when the backlight is on you don't notice it.
It's a good idea to have the insurance anyways. The phone isn't cheap, and if you have any problems within the manufacturer warranty period you get a new one without paying a deductible, if the phone does indeed have a defect. This is the first phone I've ever had where I bought the insurance for it. I normally get phones under $150 so the insurance was never worthwhile. I'm not sure how soon you need to upgrade, but it may be worth waiting until the Instinct comes out then you can compare the two. WM 6.1 should be released in a few months too.