as much as we all love to b*tch and whine about these price cuts, one can't deny that some day we will all have to replace our iPhones and these cuts will benefit the consumer in the long run. Also, I can't imagine fitting all my new apps on my 8 gig, although I am in no position to buy a new iPhone no matter the price cut.
Regarding the validity of this rumor...I believe it! It follows apple's usual pattern of releasing a bigger iPod, keeping it for about $100 extra for a few months, then discontinuing the smaller version and making the larger version a new standard. One last note: I don't believe this move will correlate in amy way with the 3g version but I could be wrong as maybe a larger hd means more battery...(correct me if I'm wrong but isn't battery life the only reason apple chose edge in the first place...)