100 percent agree I think the UI is ugly to imo.I don't get why you people think that setting the iPhone to $0.00 would increase it's popularity. People setting up a 2 year contract, wanting an iPhone, won't mind spending a one time fee of the $99 or $50 or $20. It's the DATA plan people are concerned about.
I would gladly buy an iPhone for $200 with a two year contact with NO DATA plan. It would be the same price as an iPod touch but it doubles as phone/texting device.
Back on topic though; I can see Apple doing this after the Holidays...maybe towards January-ish - with leaving the 3G and going for a $99 3GS. I don't think "Droid" mania is as big as everyone thinks; it's mostly popular among geeks who frequent Gadget sites (which are a minority of people).