Apple shouldn't have called it the iPhone. Period.
It's not just that the name was already trademarked (legal loophole finding excepting), it's that it's a stupid name that doesn't fit in with their product line and doesn't allow them to provide cross brand association with similar devices.
Look at their current naming conventions, they're brilliant:
Hardware: Nothing after the 'i' refers to the initial functionality.
iPod. A name that has nothing to do with MP3s.
iMac. A name that has nothing to do with computers.
If Apple wants the iPod to be more than an MP3 player, it can (and is) doing it. If Apple wants to redefine the iMac as a media hub, it can (and is) doing it.
Software: What comes after the 'i' refers to a use or related concept, not a Microsoft style "description" which, again, would box it in:
iTunes. It plays music. But it now allows you to buy music too.
iCal. It shows a calender. But it allows you to schedule and record events against a calender.
iPhoto. It stores photos, but has some features allowing manipulation and publication of them.
...etc...
The iPhone naming convention applied to the above products would have been:
iMP3Player
iComputer
iMP3Manager
iScheduler
iJPEGLibrary
Now, you might be asking "so what?" Well, here's the thing. iPhone is obviously a fairly sophisticated platform (the damned thing runs OS X), is it going to be a mobile phone forever? Does every variant even need to be a mobile phone? Isn't it, ultimately, the next generation iPod and if so, what does Apple call a lower cost device built upon the same platform that, well, doesn't support telephony?
What Apple should have done is call this an iPod, or if they wanted to show a generational advance over existing iPods, done so without losing the connection (some name incorporating "Pod")
"iPhone is silly." It boxes Apple in.