I found a good armband for an iphone (4) at radio shack. It was about $20 and it works well. I think it has a pocket for the key, but most running shorts will also have that.
I prefer not to run with my phone, though. A phone is pretty expensive compared to an ipod and I don't think it's good for phones to be exposed to all that sweat, plus the possibility of being dropped every time you put it in the armband or take it out.