I don't think that it makes sense what you are saying. I paid $499 for my 16GB iPhone 1st gen. They claim that I can trade it in and get a $200 credit but pay a 10% restocking fee. So after all is said and done I get $150 back so my total price paid is $349.
If I keep my phone and can get the new 3G iPhone for $299 I have now paid $798. That means that to break even with the "free upgrade" I would have to get $450 more or less selling it on ebay. I don't see anyone paying that kind of money for a 1st gen iPhone.
Regardless, has anyone done the upgrade yet? I haven't been able to get to the store because they are still sold out and you are supposed to go to the same store you purchased at to do the return and upgrade.